Entrepreneurialism and Your First Business

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Everyone dreams of making big profits when first starting their business and it’s only natural, for without profits a business doesn’t stay in business for long. Having enough capital to cover your start-up cost is a fantastic first step but it is not all that is needed to sustain your new found venture. Starting a company without thinking about how you are going to finance it is like buying a car without an engine, you are not going to get very far.

Long before we even begin to price our first product or charge for a service, we need to know what our own cost is. Only then can we account for the various expenses and how much we need to actually make to cover our own cost of doing business. Unless, money is not an issue in funding your business, it will still make sense to know how you’re going to pay for everything, just for the sake of accounting. This will be key to shaping the rest of your business decisions such as, staffing versus outsourcing, office equipment and supplies, insurances and etc.

A sad but true fact, many new aspiring entrepreneurs do not know or understand what a financial statement is. Having financial literacy in your business is a must. The need to understand precisely how your decisions will turn directly into the vital cash flow activities of your business and its future well-being is vital. One must learn to make financial decisions based on the numbers of the business. Knowing how to read a financial statement will help in the choices one makes to be more like calculated risk and not just a gamble that one wishes to turn into a profit. Once your company starts to get off the ground, the importance of knowing just exactly how your business will generate its revenue will unveil itself and if it’s enough to keep up with your current expenses. So until your business start to generate a steady flow of income, one has to count the cost and finance the business through bank loans, venture capital, and business credit sources if need be.

In addition to knowing how to read financial statements, good accounting is also required. There’s no way around it, keeping your business organized in regards to bookkeeping is crucial. Bad accounting alone is the very reason why many would be successful entrepreneurs fail. Depending on the size and the amount of business one generates, it’s possible to manage your own accounting with the various software programs that are available out there. However, this is not recommended if bookkeeping skills are not apparent. It will only cost a lot more to hire a professional later on down the road to fix your mistakes or worst yet risk being audited by the IRS due to poor accounting.

Business accounting is not an easy task to take on alone, do consider seeking the advice of a professional before you take that route. Moreover having good accounting in place will provide one with a general overview of how the business is doing financially. Being able to grasp what your profit and loss is, knowing your cash flow, figuring out the balance sheet, and knowing what the tax implications are will greatly help in making more profitable decisions as an entrepreneur for your company.

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Source by Terry Phong

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