Understanding the Financial Picture of Your Business

Most entrepreneurs out there don’t have a background in financial analysis. And unless you have a passion for figures then it’s an area that can probably cause a lot of stress. However, you can still learn the basics and build on your knowledge as you move on with your business.

The more you understand the financial analysis of your business, the more easy it is for you to keep a track on the financial health of your business and a bigger financial picture.

Keep an eye on cash flow

You can begin this by regularly reviewing your existing expenses, get to know how much you need to bring in to cover them and where you can save that valuable cash wherever possible. Knowing the basics is a great way to keep track of the overall health of your business. Additional, seeking for financial counsel from a financial expert could also save you a lot and help take a holistic view of your business.

Master the basics

Understanding the basics of bookkeeping, keeping good records will alert you to any cash flow issues and potential legal problems.

• Revenue and expenses – record every transaction so you know the financial ‘inflows and outflows’ of your business; i.e where the revenue is coming from and where you’re spending.
• Accounts payable/receivable – regularly update the records of what you owe and what others owe you.
• Stock/Inventory – keep good records of all inventory including dates purchased, quantities, purchase prices, dates sold, sale prices, e.t.c.

• Payroll – there’s so much to keep record of when it comes to employees. So, it’s usually advisable to consult with a professional at the start or make use of a good payroll software.

Once you have mastered the basics, you can now start to take in the bigger, better and holistic view of your business financials. Learn the right questions to ask and the most vital metrics for your business. As you gradually comprehend this, it’ll be a lot faster for you to spot errors or issues when they arise as well as finding opportunities to profit. Hence, you are in a healthier and more confident position to keep your business growing.

Good Luck!!!