When it comes to running businesses, there are many terms that often confuse us. In most cases, this is because businesses primarily deal with numbers, and the way they deal with numbers is different from our day-to-day dealing with numbers. Going beyond rather generic terms such as profit and loss, finance talks about various ratios etc., which may sound like Greek to any commoner turned entrepreneur. However, recognizing these terms for what they represent will make it easier for us to be familiar with such numbers and terms, which will aid in being more comfortable in the business setting. You will find elsewhere on this site a discussion of Ratios and a Glossary, which you can refer to for more definitions.
It’s crucial that you conduct regular checks of your performance numbers, at least once in every quarter. If your business has a designated person to handle finances, such as an accountant, please take this up with him or her. If yours is a one-person show, then it’s imperative that you have an understanding of finance terms and financial statement interpretation, especially if yours is a business with considerable investment(s) and / or revenue. There will be certain numbers that need to be calculated while others, like your financial statements’ figures, will be readily available. Keeping track of the calculation results will make it easy for you to track your progression. It will also make you feel more in control. Since making calculations on a daily basis is not time effective, the best way to do this is by having either a monthly or a quarterly check. Waiting till the end of the year is not advisable because if there is any issue, it might be too late to address it by the time you notice it.
It is also important to remember that you must not hesitate to seek support. Approaching a financial expert whenever you feel the need to clarify anything or learn more about business terms or complex ratios will always be beneficial in keeping you updated and in control. However, you must be cautious in determining the person that you go to since there are many in the field, but not everyone will understand the nature of your business well. If you feel like she or he is on a different page, consider a different financial advisor. There is a high possibility that the wrong advisor can make a substantial, unforeseeable negative impact on your business venture. If you have obtained a loan facility from an institution, their financial advisors could be the best source of guidance.
It should also be noted that a single expert is not the solution to all your problems. Different experts handling different fields will help you face issues arising in their own area of interest. As an example, tax reporting requirements and working capital requirements are two different domains. You may also seek help from a company secretarial services provider that specializes in fulfilling requirements of different businesses. Having clean and accurate records can not only save you from potential operational and regulatory issues but also will come in handy when you are applying for loans or seeking investors.
