What Do I Need To Know About My Company’s Finances And Accounts?

SHARE THIS

FACEBOOK

  DELICIOUS

  SU

  REDDIT

Knowing how to handle your finances and accounts effectively is one of the key components to ensuring your business is a success. From the day-to-day running of your company to establishing long-term goals, it is imperative to have a thorough understanding of business finance so you can manage and plan effectively. Keeping that in mind, in this post we will evaluate everything you need to know about your company’s finances and accounts, so continue reading to discover more.

Bookkeeping

One of the most crucial things you need to understand as a business owner is bookkeeping. This is the process of recording your business’ financial transactions. This is imperative for a whole host of reasons; not only is proper record keeping required by law, but it is beneficial when it comes to business planning, reporting to investors, fulfilling tax obligations, as well as analysing and managing finances. There are several different bookkeeping methods you have at your disposal, and knowing which one to utilise is pivotal. In basic terms, you can opt for either accrual accounting or cash-basis accounting, with the latter recording expenses when the cash is paid out, and accrual accounting recording it when the transaction reaches completion. All incorporated businesses need to use the accrual method according to the GAAP (Generally Accepted Accounting Principles).

Credit Control

Aside from bookkeeping, you will also need to have a thorough understanding of credit control if your business is to be a success. You will need to have a complete knowledge of credit control methods and techniques, as well as debt recovery procedures. Credit control is of extreme importance, as it helps businesses to decrease bad debts and ensure they have a healthy cash flow. The first step in effective credit control is always prevention, after this you need to have steps in place for an effective procedure if your customers still don’t pay the bills that are owed.

Pricing

Another important area of finances and accounts that business owners need to get to grips with is costing and pricing. If your company is to be a success, you need to know how to price effectively so that you can attract customers while still making a significant amount of profit. You will need to understand the different methods and models that are in place for costing and pricing, while it is also crucial to know how to conduct break even analyses and prepare a trading budget.

Management accounts

A thorough knowledge of management accounting is pivotal for long-term success. You need to know how to manage cash and cash flow effectively if you are to survive let alone be profitable. Not only is cash flow a key indicator of financial health, but also it is vital in terms of buying power and ensuring your business has the platform to grow. You will also need to know how to compose basic financial reports. The only way for companies to move forward is to have a thorough understanding of where they are at now, which is one of the reasons why reporting is so imperative. You will also be required to put together some financial reports by law as well. The four main and basic types of financial statements are the cash flow statement, income statement, statement of financial position and statement of changes in equity.

All things considered, hopefully you now have a better understanding of the basic things you need to know about your company’s finances and accounts. No matter what type of business you operate, it is vital to have the knowledge and capability to ensure your accounts and finances are healthy.

NCC are a complete resource for adult online learning courses – find out more at www.ncchomelearning.co.uk