Basic of Business Finance for Small Business Owners
For a successful business venture, you must be good at bookkeeping. You need to be good at managing all your business resources for you to succeed in doing any type of business. Book keeping essentially involves recording a variety of financial transactions. Apart from enabling you to make sound financial decisions for your business or company, you will need the financial records when filing your tax returns.
The secret behind successful bookkeeping is, understanding the basics of finance accounting. Whether you decide to hire a CFO or decide to do it yourself, you need to understand finance accounting and how it works. The following are some of the basics you need to practice to ensure successful bookkeeping:
Revenue and expenses
Revenue is basically the money coming in and an expense is the money going out. You need to record all the amounts of money coming in and where exactly the money is coming from and where exactly the money is going to. This will enable you to understand whether you are making a profit or a loss. If the revenue is more than the expenses then you are doing good business.
This is the money your business is making in a day to day basis. You need to record this and how your business spends the cash. This will enable you to determine how much the business is making in a day and the expenses it incurs. One of the sure ways of ensuring that you have all your cash records in check is by keeping detailed records on how you use your cash.
You need to keep a record of your entire inventory. Inventory in finance accounting are stock, merchandise or goods. They are basically assets, products or anything of value owned by a business that can be sold. Recording all inventories enables you to check what is moving fast and what is not, it helps prevent theft by employees, misplacing the merchandise and above all it enables you to tell the buying trends of your customers. You can do this by recording the stock numbers, the dates the stocks were purchased, the dates when the stocks were sold and their sale prices.
Accounts receivable and accounts payable
In business, it is normal to have debts and giving credit to other business people and even some of your customers. However, you need to keep all these records. You need to keep a record of those who owe you and the amount they owe you. You need to record the dates when this happened including the invoice numbers, amount of money owed, the terms of payment and when your debtors need to pay. You also need to record all the debts you owe other traders. You need to ensure that all the client information is recorded as well.
There are a number of accounting and finance tools available online that can help you in bookkeeping. Herein is a list to help you choose the best for your bookkeeping needs: