Financial System in your Entrepreneurship Journey
Thank you for reading the previous parts of the entrepreneurship journey. If you have missed the initial parts of this journey, do read them to keep track of this journey. In this episode, we are going to focus on the core framework of the business – the financial system. This can be divided into three parts – the banking, the accounting system and the resource to manage this. Let’s look at these aspects one by one.
There are plenty of banks that offer banking solutions for your business. Refer to the previous volume for the comparison chart to carefully examine the service offerings. Below are some of the points to be considered while selecting a banking partner:
- What are the features and benefits of the product?
- What is the schedule of charges for this product?
- What is the minimum balance that I will have to maintain?
- What facilities will I get and what will be the charges for each?
- What additional perks or offers will I get?
- Will there be a dedicated relationship manager or account manager?
- In case of issues, how will the issue resolution process work and what will be the turnaround time for this?
- Will I be able to receive foreign remittances in my account? If yes, what is the procedure to enable it?
The accounting system should have the below features:
- Manage all your expenses, revenues, customers, users, salespersons, vendors, invoices, receipts, taxes, compliances, bank accounts, etc. all under one roof.
- Generate various types of financial reports – standard and customized.
- Should be secure and compliant as per international standards.
These are the basic important aspects of any accounting system. This is a critical aspect of managing any business as every penny and transaction has to be accounted for. Hence, accounts are the backbone of any business.
Resources primarily include accountants and auditors who manage the financial system. The accountants ensure that the books are maintained with proper copies of the invoices and receipts. The auditors ensure compliance. Every year, auditors go through the books of accounts, spot and clarify any discrepancies, help rectify any defects and then prepare the financial statements (balance sheet, profit and loss statement, cash flow statement, statement of retained earnings and others as applicable) along with an audit report that needs to be submitted to the registrar of companies as part of annual compliance filing.
It is imperative that the financials are compliant for the auditors to give a positive report or a clean chit. This plays an important role in the legal reputation of the business. Hence, it is important to listen to the auditor as he will guide you with:
- Best practices for maintaining book of accounts.
- Ways and means to financially strategize your business growth.
- Malpractices to be always avoided and precautions to be taken.
- Dos and don’ts for maintaining a “financially healthy” business.
- Growth path for sustained revenue generation.
A sound, healthy and well-maintained financial system is imperative and critical for the efficient running of the business. Rather, a business is started or run based on the books of accounts. Hence, proper care should be taken to maintain and sustain this. Thank you for reading this far. Do feel free to leave your feedback and thoughts about this in the comments below. Stay tuned for the next episode.
Part 1 – Who is an Entrepreneur?
Part 6:- How to Select your Right Partner