Taking the Fear out of Finance

For new businesses, navigating the world of accounting can be daunting. In my experience, there is a pronounced fear amongst female founders - (or am I speaking personally here?)

Among the many terms and concepts we encounter as we grow our business are financial accounts and management accounts. While both serve the purpose of tracking a company's financial activities, they serve distinct functions and provide different insights into the business.

Financial accounts, tailored for external stakeholders, include balance sheets, income statements, and cash flow statements, offering a standardised view of a company's financial health. In contrast, management accounts serve internal decision-making, providing detailed operational insights like budgets, variance analysis, and KPIs to guide strategic planning and performance evaluation.

As I took on more senior roles in the corporate sector, I began to appreciate the usefulness of this hard data driven information on which to make strategic decisions and define priorities.

Many founders find it difficult to identify the key areas of financial and management information - here are four metrics which I believe should be tracked closely in any business:

1. Revenue and Sales Performance: Monitoring revenue and sales figures is fundamental for understanding the financial performance of the business.
2. Expenses and Cost Management: Keeping a close eye on expenses is essential to ensure efficient cost management and maintain profitability.
3. Cash Flow: Monitoring cash flow is critical for assessing the liquidity and financial stability of the business.
4. Profitability and Profit Margins: Analysing profitability metrics, such as gross profit margin, net profit margin, and operating profit margin, provides insights into the overall profitability of the business.

Once your business grows, you may have different individuals who are tracking this for you, however, as a founder, you can delegate but not abdicate responsibility for these areas.

#finance #businessaccounting.