Why should every entrepreneur create an accounting cheat sheet?

Studies have already proved that most of the entrepreneurs fail to keep their businesses floating due to issues with their business idea (lack of innovation) and, of course, finances. Small firms, start-ups often operate without an in-house finance or accounting team.

Driving the organization without an accounting professional is just like flying an airplane without a proper navigation system in place.

Accounting offers a financial picture that helps you understand how well your organization performs, what the firm owes, and what it owns at the given point in time. Such a financial summary helps in understanding the firm’s future funding needs.

Accounting chart or sheet 

Accounting does not mean spending hours going through stacks of financial documents. There are several software solutions like Zoho Books, Quickbooks, Tally ERP9, and NetSuite ERP, etc. that help in tracking all the financial transactions of the firm. These systems also help in generating reports that are crucial for taxation, invoicing, auditing, as well as legal purposes.

A digital chart or a sheet featuring the firm’s liabilities, expenses, and income can be a superb option. Let the firm’s ERP or accounting system keep the sheet or chart updated on a real-time basis.

The crucial areas of focus may vary from one firm to the other. However, when it comes to bare minimum elements from accounting numbers, the three factors that need constant monitoring are the cash flow statement, the income statement, and the balance sheet. 

The most crucial accounting equation for any entrepreneur is ‘Assets = Company’s liabilities +Equity.’ The balance sheet data provides a glimpse into the same and offers the company’s exact net worth value at any given time.

The income statement offers a glimpse into the firm’s performance during the selected financial year. It highlights how the company created/destroyed wealth. For those who are not good with math, the bottom line elaborates the result with a simple Yes/No. Besides the gross profit figure, the accounting software can also be programmed in a way that income statement reflects the list of products sold, along with details for marketing and other support costs incurred.

The income statement does not reflect details about cash transactions, and this is where the cash flow statement comes into the picture. The cash flow statement reflects cash-related balances from the selected fiscal year. It highlights the cash generated via day-to-day operations, financing, and other investments.

Basic knowledge about accounting is crucial

Several start-ups in India have failed during the last decade. The idea behind the start-up or small business can be turned into a successful product or service only if the entrepreneur ensures his math is in place.

Opting for a certified course in accounting can help entrepreneurs in ensuring the same. The basic four months accounting course for entrepreneurs at Ahmedabad-based Munimji Academy covers fundamentals of accounting, direct and indirect taxes, fundamentals of banking, basics of export/import, and company law as well. The institute is also famous for its certificate course on the Goods and Service Tax (GST).

Source: https://accountingcoursesahmedabad.wordpress.com/2020/02/13/why-should-every-entrepreneur-create-an-accounting-cheat-sheet/