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(...) What basic knowledge about finances is necessary when starting a business? (Quora)
(This post first appeared on Quora Germany.)
The most important financial decision to make when starting a small business is this Organization of the finance area. I.e. look for a good tax advisor who accompanies you from the start and stands by your side. But be careful, do not use the external advice as a sparring partner, it can quickly become expensive.
It is important to clarify the question of what obligations exist towards tax offices and other authorities. In the ideal case, quarterly bookkeeping is sufficient, which again saves costs.
When you founded the company, you already decided on a bank account. Make sure that you have online banking access. The daily look at the bank account is even more important. Your small business will not function without cash in your account.
Knowledge of finance (and accounting)
The bookkeeping guarantees the correct presentation of all (financial) processes of a company. The important thing is the word properly. Attention, right at the beginning collect, check and store all contracts, invoices, receipts, etc. properly. The tax advisor is disciplined and helpful here. Use a cloud service provider such as box, dropbox, or google drive to store and share documents. Should you grow and receive and send more invoices, you can take a look at services such as Candis, Fastbill, etc.
Understand the balance sheet
You can forget the actual “balance sheet” in the first moment. Firstly, it results from the financial movements up to the end of the year, which you now have under control thanks to the orderly financial processing (see above). Secondly, your tax advisor will draw up the balance sheet and, thirdly, he will explain it to you. So there shouldn't be any surprises. Incidentally, a balance sheet is best understood or learned from your own example.
All decisions have financial implications, everyone. The question now immediately arises of the financial plan in order to be able to assess the effects. You can philosophize for as long as you like about the topic of financial planning. I would like to suggest another approach: the cash flow plan.
Cash flow planning
Take your bank account, assign incoming payments and payments to accounts. (You can get the account scheme from your tax advisor). And then think about which incoming payments / payments you expect in the next 1/3/6 months. Don't complicate anything, just based on your assumptions and knowledge. The costs are the simplest: rent, 500 p.m. - Internet 150 p.m. - etc. That gives you a very good feeling of where your company is developing. And then later on is the best basis for the financial plan. But that's another chapter.
Tomasz Tunguz, a VC, said (freely translated): It is not the accuracy of the plan that is decisive, but the fact that there is a plan at all. Ultimately, this helps to understand the direction of the company, make decisions and set milestones.
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Credits: Photo by Nick Morrison on Unsplash
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