Finances form the crux of all business transactions. The prolific entrepreneur must learn the art of handling it. Well, proper finance management is no rocket science, and you don’t necessarily need to be an MBA or CPA to manage business accounts. However, there are some significant financial facts that every entrepreneur should be knowledgeable about. Here is the list of noteworthy financial aspects for all budding entrepreneurs out there.
Knowing advantages of account payable
While stocking up goods inventory of your business, you must delve deep into the nuances of Account Payable or AP. Purchasing stuff on credit results in making late payments to your vendor. Immediate payments in cash might just be the right thing to do for ensuring self satisfaction, but not for financial management of your business. Balancing the pull between making late payments, timely payments as well as extending the AP requires considerable effort from your end. Incorporating appropriate entrepreneur india ideas will save you the horror of ill reputation, in this regard.
Managing account receivable
Whenever there is a B2B transaction taking place, you must know the nitty-gritty of Accounts Receivable. During this specific transaction, you do not receive instant payments from your customers. You provide them with the goods and invoices, and they make late payments. Although the AR finances are not in banks, they account for a major portion of your business sales and exhibit themselves in Profit and Loss section. Continuously accumulating AR and failure in its collection from the customers can bring about downfall of your business.
Handling debt repayments
Proper tracking of business cash flow will provide insight into the debt repayment scene. Interest payments show up in the profit and loss accounts but not the debt repayment or principal amount. Therefore, there is need for playing the vigilante here.
Managing asset purchase
Asset purchasing happens to be one of the essential functions of a business. But the cost you incurred while investing in plant, furniture, instruments and land will not show up in the Profit and Loss accounts.
Know the difference between fixed and variable cost
Gauging the difference between fixed and variable costs is also important. The seed capital India investors can perfectly comprehend the significance of regular employees or skilled labors on contractual basis.
Sunken costs are unimportant
In case you opt for angel funding mumbai, you need to keep certain aspects in mind. As angel funding involves the hard earned finances of other individuals, you must ensure proper utilization of the same. Know the insignificance of sunk costs. That will prevent further wastage of finances.