A business needs cash to survive. So it is very important to know how much cash you will have in the coming days, weeks, months or the year. To know how much money you will have
Keep Good Records
Keeping good records means that the records are kept in a way that you can understand and learn from on a day to day basis. These records tell the story of your business; is it doing well, is it struggling, is it stagnant? Records are a way that can help you see and learn about how your business is going.
Keeping records about the ways in which money moves in the business is very important as these records can later be accessed, used and learned from. Or these records can be used to get a loan if the need arises.
Understand the Records
When you keep records, do not just keep records for the sake of keeping records. Boxes and boxes of receipts, pages and pages of excel sheets will not be of any use if you do not understand them and why you kept them. The key to understanding the records is not having lots and lots of data and figures, it is having data and facts you can use and understand. So you must keep records in the way you understand and in a way you can interpret and learn from.
Also as you get bigger and can afford a book keeper or accountant; do not take your eyes off the ball. You still need to keep going through the records even after handing over that part of the business to another person. You must understand what is going on every step of the way. Even if collecting and recording is no longer your task.
Use the Records
To use the records you must also keep them in these 3 ways. The first is the cash flow record and it estimates how much cash you will have. The second is the profit and loss record which looks at sales, costs and expenses in the past. And finally the balance sheet which will show you what your assets and liabilities are; together the 3 will give you the information you need for any future plans.
Your future plans may include borrowing money from a bank or other institution. And before they give you money, they will want to know how good you are at record keeping. These records will speak for you without you having to say anything. They will tell your business journey. So it is imperative to learn how to use these records as soon as possible and as early as possible.