Decoding finance for techpreneurs - Accounts and Finance

It is important to break some myths like "Hamara CA sab dekh leta hai".

The first myth that needs to be broken is that that analysing and creating insight into your business operations is not a part of his scope of work. Your Chartered Accountant's role is limited to ensuring that your organisation is compliant with the applicable laws and regulations and signing the balance sheet for you as your auditor. A Chartered Accountant is not necessarily as Business Consultant or a Finance Consultant.

The second myth is that Accounts and Finance are synonymous. Let's take a look at these two :

Accounts is recording of all transactions in a business organisation from order booking, purchase of material, production, and final despatch & collection. Since years however, it has been linked only to payments and collection and has therefore been delinked from the core operations by most entrepreneurs. In reality accounting is meant to bring in accountability to every business operation by reflecting them in monetary terms. It is dangerous to take business decisions without taking a look at the accounts at least once a month. Ignorance of your own accounts can be dangerous.

Finance – While accounting is more of a recording activity, finance is the real game of managing business cash flows effectively to ensure that at no point a cash-crunch situation arises. It includes segregating business cash flows into short term, long term and operational, and creating mechanisms of payment and collection in such a way that the business runs with minimum dependence on borrowed funds (banks, working capital, or unsecured business loans).

Now let's take a look at what the entrepreneur really needs to look at in accounts and finance. Here are some quick notes to help you monitor your business :

• Ask your accountant to provide you a monthly profit and loss statement
• Check whether for the given sales, you have actually made the profit that you estimated or is there a shortfall. If yes go deeper into finding out why
• Check with your stores and purchase department how they have decided the quantity and price at which a raw material is being purchased. Try and compare it with the purchase register that your accountant maintains for filing GST returns.
• Same is the case with sale, check with your despatch department and compare it with the GSTR1 that your accountant has filed.
• For better financial management keep a check on what terms you are giving to your customers vis.a.vis what you get from your vendors
• Check on your stock movement on monthly basis and question your stores team if you find any slow moving stock.

These are some very basic things which give entrepreneurs insights into their own business on a monthly basis.
Hope you will give it a serious thought and at least once a month delve into the accounting and financial interpretation of your business operations.

Do check the next article on Understanding Business Operations in Financial Terms – Need and Importance

Links for all Business Articles:

• Controlling Overtime for better Productivity and Profits
• Inventory Control for Better Cash Flow Management
• Integrating ERP for Growth
• How to Recover Your Money in Business
• Use GST to your Advantage
• Managing Cash Flows 03 - Types of Funding and Their Utilisation
• Managing Cash Flows 02 - Timing your Cash Flow
• Managing Cash Flows 01 - Importance of Cash Flow and its Management
• Pricing Your Products - Understanding How to Price Your Products
• Operational Efficiency and Profitability
• Understanding Business Operations in Financial Terms - Need and Importance
• Decoding Finance for Entrepreneurs
• Financial Atmanirbharta
• Learning Business from Lord Ganesha