You will be better off as an entrepreneur if you know different aspects of accounting which is a specific coursework that is included in the Master of Business Administration or MBA program. Considerable knowledge in accounting will help in financial management, managing your credit and debts well so that nothing goes out of control at any point of time. You will be able to make better financial considerations and make a proper budget.
Accounting is a fundamental aspect of business administration for the entrepreneurs for several other reasons apart from the obvious ones of managing costs and receivables. Entrepreneurs being idea people, knowledge of accounting will help them hone their other facets all of which is aimed at maximizing the potential of the business.
All successful businesses rely on competent accounting essentially as this is the bottom line of running any business. Ideally, with the cost of operations so high in this modern business world there is no liberty for any business owner to be liberal when it comes to money management. On the contrary, a planned and tight management of budget will ensure expedited and desired success of a business.
The different areas of accounting that you must know as a business owner to ensure success includes:
- Balancing the books
- Revising financial strategies as and when necessary
- Judge the intended outcome of any initial business investment
- The expected return on investment that may be in the form of profits for company owners as well as the stakeholders
- Ensure proper movement of money into the right channels and areas and lots more.
Therefore, accounting is the language and platform of success for a company ensuring its uninterrupted operation and desired and continual growth.
It is not easy
Though entrepreneurs play many different roles in a business, accounting seems to be the most significant one as ensuring proper movement of money is not an easy task or a simple matter. It involves overall cost, income, investment and profits thereby making it a part of every minute aspect of business management. It includes:
- Small business grants
- Product design and manufacturing costs
- Distribution costs
- Marketing campaign budgets
- Employee salaries
- Human resource budget allotment
- Rent or purchases of office space, equipment, buildings, and machinery
- Large business loans from banks or other sources such as liberty lending US
- Projection of profit margin
- Tax and other obligations
- Employee benefits and grants
- Increase and investment returns and much more.
In fact, better accounting knowledge possessed by any business owner will ensure that there is a perfect balance and proper allocation of funds in all the aspects of the business, ones that are mentioned above and ones that may come up time and again.
Reasons to know accounting
Now the question is why on earth should the entrepreneurs who are the idea people know and worry about all this? The simple reason behind is business owners are often responsible for different business operations and functions, at least in the early stages of the business.
In these stages often the startup entrepreneurs are not able to bear the cost of hiring an experienced accounting staff. They may not be able to bear the high expense of creating a marketing department, contracting out to a professional marketing company, employing a logistics management firm and others. Entrepreneurs should ideally do these themselves in the early stages of business and therefore need to understand the financial intricacies and nuances that may involve every aspect of their business dealings.
On the other hand, even when the business grows to the extent where the entrepreneurs can hire and delegate different accounting and financial management responsibilities to different specialized managers, it is still required to have an in-depth understanding of how each department is functioning financially. This will help the business owner to evaluate the level of performance and competence of each department.
Resource and tool for business growth
Accounting is a useful resource and perhaps the most significant tool for the growth of your business. It is also very important to judge the immediate financial health of the business and to formulate effective strategies as and when required. Apart from that accounting helps in:
- Making future projections and predictions on real time basis
- Smart budgeting in the present
- Avoiding the pitfalls of the unnecessary debt accrual that can affect the fledgling company
- Evaluating the aspects that work well for the business
- Making worthy investments
- Determining the functions that need improvement and
- Identifying and striking off unnecessary or unprofitable areas of investment and expenses.
Proper knowledge of accounting is perhaps more important for a startup entrepreneur to provide competency on a large scale apart from any specific function of the business. It will help the business owner to know the scalable movements and the rapid changes in it and act accordingly. The accounting principles and its strategic use will help the business to grow in the desired direction and magnitude with each phase of it properly planned, tried, reviewed and revised.
Know your financing options
The knowledge of accounting is truly a compulsory attribute for a successful entrepreneur as it will help to understand the financing option that is required for any business to grow. You will be able to assess precisely how much financing you need for your business based on the business plan and projection, the cash flow forecasts, receivable and investment instruments, market conditions and other important and relevant factors.
You will able to know how any uncertain event such inappropriate and disappointing sales can impact your business and financial position.
You will also be aware of the various different types of financing and their pros and cons on your business, whether or not you will make a short term investment or does it make sense to take a long term financing.
You will be able to make important decisions on other options available such as leasing your vehicles, equipment or even your office space or purchase them outright and know your total borrowing capacity and how to increase it to attain more financial flexibility.
Author Bio: Marina Thomas is a marketing and communication expert. She also serves as a content developer with many years of experience. She has previously covered an extensive range of topics in her posts, including money saving, Budgeting, business debt consolidation, business and start-ups.