The traits that make for a successful entrepreneur are not always the same traits needed to thrive as an accountant. Entrepreneurs are optimistic risk-takers. Accountants are detail-oriented realists. To see their dreams through, entrepreneurs must have a deep well of enthusiasm that at times borders on being over-confident. Accountants, on the other hand, know that caution is often vital for long-term financial health.
As reported in the New York Times, it’s “entirely possible for a company to be profitable but fail anyway because it does not have enough cash coming in to pay its bills.” Knowledge of accounting basics can prevent this from happening.
It’s imperative that you know how to manage your cash flow to become a successful entrepreneur. A simple foundation in accounting basics for entrepreneurs can turn dreams into a thriving reality.
A Few Accounting Basics for Entrepreneurs
Track Expenses Promptly
It’s helpful in multiple ways to keep track of all your expenses in good detail and to record them as soon as possible. This will help you know how much cash you have available, how to manage your expenses, and also provide some necessary information for your taxes.
The sooner you give invoices to your customers, the quicker they will pay you. This will also help facilitate sending reminders to customers who pay late, as well as cutting off services to those who don’t pay at all–necessary tasks to help keep your company running at full strength.
Update Your Bank Account
Are you a fan of “balancing your checkbook?” If so, this will come easily to you. It’s a good idea for everyone to reconcile the figures the bank has for account statements with the receipts, withdrawals, payments, and income that are pending, but it’s crucial for entrepreneurs to make this a regular habit. Knowing exactly how much cash is available on a day-to-day business can make or break the success of your enterprise.
These are just a few of the accounting basics for entrepreneurs to master. But those interested in starting their own business should also think as accountants do. Rooted in your ability to make financial predictions and act, is the future health of your business. This will lead to greater overall financial health, better budgeting, and a reduction of excess debt.
If you need more guidance on questions of accounting and finance, reach out to our team of tax specialists and financial professionals here at DCA Certified Public Accountants.