Having a keen business sense is vital for entrepreneurs, but few new entrepreneurs realize that there’s much more they need to know to be successful. Though most of their time should be spent on the more exciting parts of launching a business (branding, development, strategizing, and so on), the unexciting parts are just as important for a business’s success. Entrepreneurs have to be a jack of all trades, so it’s necessary to invest your time in the less thrilling parts of the business, like finances and accounting.
Everyone knows on some level how crucial finances are to running a successful business, but the extent to which an entrepreneur should be familiar with accounting isn’t often thought about. You should be able to move your money around to buy supplies, pay creditors, attract investors to your business, and generally handle the financial aspects of running your business. These are critical skills to have, so before starting a business, you should consider what financial aspects you’ll need to be familiar with.
Some people can hire an accountant to handle the financial aspects of running a business, but if you don’t have the means to, you should be familiar with at least a few skills to operate successfully. Here are a few accounting skills to have up your sleeve before starting a business.
Cash Flow
New businesses need to keep cash flow in mind, especially when credit lines are limited and financing is more difficult. Cash is critical to operating your business and moving it forward past the start-up stage: it allows you to pay suppliers, build an inventory, invest in customer outreach, and generally grow your business. Understanding what cash flow is and how it works will help you plan for the future and ensure there’s enough money in your bank account to keep your business running and growing. It lets entrepreneurs plan accordingly for worst-case scenarios, prevent unnecessary cash shortages, and put any excess cash to good use.
Balance Sheet
Every entrepreneur should be aware of how to fill out a balance sheet. Balance sheets provide a snapshot of a company’s financial health at certain points in time, which lets those interested in the business see the available resources and how they were finances. They also let interested parties see both your assets and liabilities, telling them what you have at the moment and what you owe currently. Balance sheets also help to keep a business in check; keeping an eye on liabilities while sales increase will let you manage the long-term success of your business. It’s critical to investors, potential buyers, and entrepreneurs so everyone knows where your business currently stands.
Forecasting
Perhaps most important is the ability to forecast the future of your business. How will your business grow? How can you maximize your revenue streams? Will you be able to grow your team? Motivation is key toward a business’s growth, and being able to make accurate predictions about the future of your business will let you see the potential future revenues, operating costs, resource needs, and profit levels to do so. Without being able to forecast, you could potentially grow too fast or not fast enough—both of which can negatively impact your business.