Understanding the basics of business finance

Understanding the basics of business finance

Finance has so much to do with maths and unless you were a maths buff at school, you’re probably petrified that you’ll mess up the business’ finances.

Don’t worry, the first step is to make sure you understand the basics of business finance and then hire a good accounting company that will take care of the day-to-day finances so that you can get on with running your business.

Here are the different things you need to know to get a grip on the basics in business finance:

1. Know exactly what your cash flow looks like at any time: Your cash flow is the money coming and money going out of your business. You should know exactly how much is in the bank, what you owe and how much is due to come in as payments from clients.
2. Create a business budget: This will help you work out how much money you can spend on marketing, new equipment, more staff etc. Your business should have a budget and every department in your business should have a budget so that you can manage expense.
3. Know what all the numbers mean: As with everything else in business, your business itself is a measurable entity. Make sure all the numbers line up and keep watching the numbers so you can pick up any alarm signals way ahead of disasters.
4. What is bookkeeping exactly? Bookkeeping is the function of maintaining your financial records. As a business, it’s important that you do this accurately, methodically and regularly. You need to record your expenses and your payments.
5. Being VAT compliant: VAT is standardised for non-staple items in South Africa at 14%. As a business you need to make sure you charge VAT and when your turnover exceeds R1 million, you need to register as a VAT vendor.

If you can’t trust your staff, don’t work with them. There is nothing worse than having to check everything everyone does because you can’t trust them. It will take up all your time and they will do a bad job because you are always on their case. Hire someone you can trust and let them do their job. 

You must know your numbers though and spot check though. This is your job as their manager. The buck stops with you so you can’t blame anyone else for not being compliant.