Instalment 3 of the VeloCITI business incubation program dealt with Finance, an area many entrepreneurs need lots of help with. Knowing that we might all be intimidated with this session looming ahead of us, Tony Mallam of cape Venture Partners assured us he’d ease us into the subject.
The Finance module is an optional one, though most of the companies involved in VeloCITI saw the need to attend and with good reason. Getting the numbers right in business can be a matter of life or death, for the business that is.
We started out with an introduction of what the Finance module will cover in the next few months and I was completely overwhelmed by the amount of business concepts I have either never heard of or never been directly exposed to. It’s all well and good to be a master of your own art, but when you’re an entrepreneur and running your own show you need to be a jack of all trades and a master of a few as well.
So we started out with a few definitions of what Accounting is all about. I found this one interesting, using the word "Art"
“the art of recording, classifying and summarizing in a considerable manner and in terms of money, business transactions, activities and events, which are part of a financial character and later on interpreting the results of the reports”
Keeping Financial Records – Some of the benefits
Keeping financial records is most definitely an art. Having a clear, logical system, one which can be easily analysed later, and from which certain insights can be gained is a skill which must be developed as a necessity. This is a serious weak point for me having always been an employee and not needing to worry about overheads and that type of thing.
Budgeting & Tax Records
Keeping good records helps you budget correctly, helps you easily spot areas you can streamline and keeps things in order for when the taxman inevitably comes knocking at least once a year. Keeping clear financial records is most importantly done for SARS(the South African Taxman) without which you could land yourself and your business in some trouble with the Law. This is an activity which has to be done on a monthly basis. You’ll know when you’re spending too much on entertainment and when and how you might have saved on your telephone budget as well.
Tracking your businesses health
Knowing when money comes in and when it goes out gives you a clear idea of how you’re doing, whether you’re making profit or operating at a loss at any given time. Having the figures on a timeline can also allow you to track if any activities engaged in have resulted in significant gains or losses.
This timeline can be inspected will help should you need to review any inconsistencies in your cash flow as well.
Investors want to see the money
Should you be looking to bring partners on board or to apply for investment, loans etc, having a clear financial history in black & white helps make a case for your business.
How I currently do it
Currently my accounting procedure involves keeping any and every slip, including coffee at Vida which happens quite regularly for meetings. That’s a business expense by the way. My lovely wife then helps me with a beautifully structured excel document she has created which keeps a nice record of our financial activities broken down into personal and business and allows us to create calculations for each type of expense. This has helped in a few instances for me to determine when an invoice was paid or when I topped up my last data bundle for example, so it serves many other functions as well.
Petty Cash
One of the simplest systems you can use to manage your daily expenses is the petty cash float. basically you start out with a box, hopefully one which has a lock. based on your budget for these types of expenses you put some cash in and each time anyone needs to use the petty cash they need to give you a slip of paper with their name, signature, purpose of the cash and amount taken. When they return they hand over the slip and any change. Once all the cash is gone the total amounts from all the IOU’s and the slips should equal the original cash amount.
Accounting Software
My process for keeping records is not sophisticated at all and leaves much to be desired, though it’s a starting point and with the help of VeloCITI I hope to take a step up into the world of Quickbooks or Pastel accounting packages pretty soon. I’ve also been investigating a few open source accounting packages though with the little knowledge I have right now it’s a tough decision to make.
If you’re interested in open source accounting Cubit(made in SA) & Compiere seem like pretty powerful packages for more than just accounting. For now excel is my friend, it will make the transition into an accounting package a little easier than written notes I would imagine. Be sure to back up though.
I’ve got a long way to go in the area of finance and appreciate every little bit of advice I receive along the way. veloCITI 2008 rocks!!!