The goal of any business is greater growth and profit. Good financial management is essential to achieve this goal. Sound business management also includes the proper structuring of sales and marketing, accounts, human resources and information technology.
Financial literacy is an essential skill for a small business owner and a crucial aspect of good business management. Of great help in this area will be the advice of your chartered accountant. He has the skills and the knowledge which will help you make sense of the numbers.
Cost effectiveness in the research phase is a must. To launch into a business without first conducting extensive research is a recipe for disaster. You need to work out a simple way of testing your ideas before you go too far down the track. Visiting other similar businesses and observing their day to day operation as well as talking to the owners and asking questions is a good first step. By doing this, you can avoid spending time and money investing in a product that has no market.
Importance of Services of a chartered Accountant
You should involve a chartered accountant in the planning stages of your company. He can help you decide whether you have enough money to start your business. How much do you need? It is important to understand your risk appetite and/or comfort level on giving control to financiers. The amount you need also carries some risk; the more you have, the more you have to lose (if you do). Funding your business entirely yourself means you’ll have more control, but growth will prove to be slower. Laying all your cards on the table for your accountant will help him assist you in preparing a sales forecast, estimating profitability and the financial viability of your proposed business.
Discuss with him what the true cost of doing business will be. A lot of people like to look at sales and revenue as the measure of the success of a business, but only profitability really counts. Keep your overheads low so they don’t cut into your profits.
Scalability is important too. Your business should be flexible enough to scale up or down depending on market conditions. Only commit to an expense if it will prove of value to the business.
Once your business is up and running, there will be financial statements to prepare and analyse. Solid financial management means having a good understanding of these financial statements. There are two basic financial statements: Profit and Loss, which reports on a business’s income, expenses and profits over time. The second is the balance sheet which is a report on the assets, liabilities and net equity of a business at a given point. Your accountant will no doubt be involved in the preparation of both of these statements, and he should also be able to explain them to you and answer all of your questions.
You can’t manage and grow a business on your own. You need to have a business plan, a mentor/coach, join a peer group and strive to manage your stress levels. A major help particularly in the all important financial area of your business will be your accountant. Choose one wisely, build a good relationship with him and your load will be considerably lightened.