These are the key concepts of financial management: Cash flows
Posted: Mon Dec 23, 2024 7:14 am
When you're starting a business, the first big headache is usually making sure the numbers add up at the end of the month.
This is where financial management comes into play , the instrument that allows you to know the solvency of a company and that must be controlled from the beginning, since it will be one of the indicators that will give you information about whether you are on the right track. If you are an entrepreneur, you will be the one in charge of this department.
For this reason, in the first steps of a business you will be an investor, an accountant, a product developer and a salesperson. In short, you will be your own business.
Below I will give you a series of basic concepts on financial management and 5 tips that will serve as a guide.
First of all, I'm going to try to define what finance is, because it's not just about paying bills. Finance is a branch of economics that studies the exchange of different capital goods between individuals, companies and institutions. In other words, it deals with money management. An entrepreneur must make fundamental decisions for the viability of his business, such as: how much money do I invest, where do I allocate that investment or how do I obtain the necessary financial resources.
It records the company's receipts and payments, in other words, its cash movements. It determines the company's capacity to generate cash to meet its obligations and expansion projects.
Income statement or profit and loss account
It reports on the company's financial situation as a result of ordinary operations. It is obtained by subtracting expenses from income and the result may be profits or losses.
Ebitda
Financial indicator that comes from the acronym Earnings Before Interest, Taxes, Depreciation and Amortization. It is used as an indicator of business profitability.
Assets
All assets and rights that belong to the company, for example: cash, accounts receivable kuwait phone number list , furniture, machinery, etc.
Entrepreneur reviewing the status of her financial management
Liabilities
All company debts and obligations, such as payrolls, taxes payable, bank loans, etc.
Net worth
The value of a company after all debts have been discounted. It is calculated by subtracting current liabilities from assets.
Shareholders' equity
The initial amount of money contributed by the owner or partners of the SME plus the profits generated by the company and not withdrawn.
To interpret this data and apply it to your business, you must use the balance sheet , an accounting statement that presents the financial situation of a company at a given date. In other words, it tells us what resources the company has (assets), how much money we owe (liabilities) and what capital we have at that specific time. It is the financial statement par excellence.
Having reliable and up-to-date financial information can be the difference between making a good and a bad decision. SMEs are more vulnerable to financial errors and omissions, because they do not have support resources or cash reserves.
That's why I'm leaving you with 5 tips that you should take into account in the financial area of your small business to make it grow like wildfire!
Along these lines of advice, I recommend TED talks. As an entrepreneur, having the experiences of people who have already gone through your process and learning from their failures and/or successes will give you new perspectives. Along these lines, I want to share with you this inspiring talk by Elon Musk:
In short, finance is a fundamental part of the growth and development of SMEs. In fact, you may have a great business idea, but if you can't balance your accounts, it won't last long. To obtain the necessary knowledge, I'll give you 2 ways to access related training:
This is where financial management comes into play , the instrument that allows you to know the solvency of a company and that must be controlled from the beginning, since it will be one of the indicators that will give you information about whether you are on the right track. If you are an entrepreneur, you will be the one in charge of this department.
For this reason, in the first steps of a business you will be an investor, an accountant, a product developer and a salesperson. In short, you will be your own business.
Below I will give you a series of basic concepts on financial management and 5 tips that will serve as a guide.
First of all, I'm going to try to define what finance is, because it's not just about paying bills. Finance is a branch of economics that studies the exchange of different capital goods between individuals, companies and institutions. In other words, it deals with money management. An entrepreneur must make fundamental decisions for the viability of his business, such as: how much money do I invest, where do I allocate that investment or how do I obtain the necessary financial resources.
It records the company's receipts and payments, in other words, its cash movements. It determines the company's capacity to generate cash to meet its obligations and expansion projects.
Income statement or profit and loss account
It reports on the company's financial situation as a result of ordinary operations. It is obtained by subtracting expenses from income and the result may be profits or losses.
Ebitda
Financial indicator that comes from the acronym Earnings Before Interest, Taxes, Depreciation and Amortization. It is used as an indicator of business profitability.
Assets
All assets and rights that belong to the company, for example: cash, accounts receivable kuwait phone number list , furniture, machinery, etc.
Entrepreneur reviewing the status of her financial management
Liabilities
All company debts and obligations, such as payrolls, taxes payable, bank loans, etc.
Net worth
The value of a company after all debts have been discounted. It is calculated by subtracting current liabilities from assets.
Shareholders' equity
The initial amount of money contributed by the owner or partners of the SME plus the profits generated by the company and not withdrawn.
To interpret this data and apply it to your business, you must use the balance sheet , an accounting statement that presents the financial situation of a company at a given date. In other words, it tells us what resources the company has (assets), how much money we owe (liabilities) and what capital we have at that specific time. It is the financial statement par excellence.
Having reliable and up-to-date financial information can be the difference between making a good and a bad decision. SMEs are more vulnerable to financial errors and omissions, because they do not have support resources or cash reserves.
That's why I'm leaving you with 5 tips that you should take into account in the financial area of your small business to make it grow like wildfire!
Along these lines of advice, I recommend TED talks. As an entrepreneur, having the experiences of people who have already gone through your process and learning from their failures and/or successes will give you new perspectives. Along these lines, I want to share with you this inspiring talk by Elon Musk:
In short, finance is a fundamental part of the growth and development of SMEs. In fact, you may have a great business idea, but if you can't balance your accounts, it won't last long. To obtain the necessary knowledge, I'll give you 2 ways to access related training: