So many startups come and most of them run out of business in their initial years. Do you know what causes such a high rate of failure? Well, it can be the wrong idea, choosing the wrong market, not spending on advertisements, and many more reasons. But lack of financial knowledge lies among the top reasons for business failure. Even established ones can vanish out of the market due to financial illiteracy.
You want your business to keep growing and for that, you should never ignore the following information.
- Business Finances: Keep in mind that the financial situation of a business is not how much money the bank account holds. This leads several entrepreneurs to make bad financial decisions, leading to a cash crunch, and ultimately closing of the business. For an accurate analysis, you should start recording all the transactions and measure liabilities against revenues to understand the exact position. This can help you plan to spend the amount you will be left with by the time you need it.
- Analyzing the Profits: Again, the bank balance is not the profit you earned. It’s the money you have today. And with business invoices down the line, the balance will reduce gradually. The Profit-n-Loss (PnL) statement gives a true picture of the profit and the percentage of your year-on-year growth.
- Financial Reports: Besides the PnL statement, the balance sheet is another important financial report you should understand. This will help you make better decisions.
If you don’t feel confident about managing all the finances by yourself, you can hire professional accountants in Toongabbie to do the job. You can learn the basics of business finances from them while they help you make better decisions for growth.