Having good financial systems are key to the overall success of any business. Financial systems provide you with an overall picture of how your business is doing and where it is headed. It is absolutely essential to have this set up and running solidly right from the beginning. Below are a few key reports that you should have in place to properly manage your financials:
- Income Statement – An income statement shows income and expenses and will give you a picture of where you are making or losing money.
- Balance Sheet – A balance sheet provides a bigger overall picture and compares your assets and liabilities. This shows you your overall net worth.
- Operating Budget – This is a budget to project sales and expenses to be able to predict times where you may have cash shortfalls so that you can be prepared for them.
A good financial foundation also includes having the proper team in place. Your team may include a bookkeeper, a controller, a chief financial officer, and a business manager. You may decide to take on some of the roles yourself. If so, just make sure that you are qualified. It is important to know where your skills are and also where they aren’t.
Taking on debt or bringing in investors is another important part of your financial foundation. You should consult with your trusted advisor when you are considering taking on investors or acquiring new debt. There will be agreements that need to be created and reviewed and this is a time when you should definitely consult with your accountant and lawyer.
Having a good financial system in place can be tedious and time consuming, but avoiding an audit and getting approved for a loan are great rewards for your efforts.