Financial Terms – Every Entrepreneur Should Follow

With a variety of built-in skills, entrepreneurs go into business. Some of them are of salespeople, while others have the ability to come up with ideas that sell themselves. However, in this handful of entrepreneurs, few of them are financially savvy. The mainstream cringe at the thought of organizing financial statements and managing their books.

Business owners should hire an accountant or utilize accounting software in order to simplify the Business finances. In addition, there are some basic financial terms shared by Richard Kassel that every entrepreneur should know to grow their businesses. These terms may originate in meetings with potential investors, partners, and clients. That’s why it is significant to get familiar with them and understand their effect on your business.

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Assets

A business has economic resources, including the products it has in inventory, the office furniture and supplies purchased for use, and any trademarks or copyrights it owns. These assets determine the value of a business. However, if business experienced difficult times that can be helpful.

Liabilities

Any debt accrued by a business in the course of starting, growing and maintaining its operations like bank loans, credit card debts, and monies owed to vendors and product manufacturers. Richard Kassel categorized Liabilities into two major types: current, which refers to immediate debts (e.g. money owed to suppliers), and long-term debt, which refers to liabilities (e.g. loans and accounts payable).

Expenses

In order to operate, the company incurs expenses each month including rent, utilities, legal costs, employee salaries, contractor pay, and marketing and advertising costs. In order to stay financially stable, a business should keep expenses as low as possible.

Cash Flow

Cash flow is the flow of funds through your business each month, including income and expenses. Businesses track general cash flow to determine long-term solvency. A business’ cash flow can be determined by comparing its available cash balance at the beginning and end of a specified period.

Financial Report

A financial report is a comprehensive account of a business’ transactions and expenses. Usually, created to give a business oversight of its financial matters. A financial report may be prepared for internal use or external sources, such as potential investors.

Cash Flow Statement         

For a specific period of time, the report that shows the entered and exited money of your business is called as cash flow statement. Richard Kassel shared its four categories: operating activities, investing activities, financing activities and supplemental information.

Profit and Loss

In order to stay financially healthy, a business must have a regular profit that exceeds its losses. However, the profit and loss are analyzed through the income statement.

Accounts Receivable

The amount received by a business from its clients. Usually, the client is notified by invoice of the amount owed, and if not paid, the debt is legally enforceable. On a business’ balance sheet, accounts receivable is often logged as an asset.

The Bottom Line

In a business journey, a business owner doesn’t necessarily need to be a financial expert. However, these basic financial terms from Richard Kassel are important at the time of conversation with colleagues, potential clients, and investors. Through financial reports and budget maintenance, a business can increase its chances of success.

Originally Posted: https://richardkassel.wordpress.com/2017/09/21/financial-terms-every-entrepreneur-should-follow/