Entrepreneurs need to give importance to and understand accounting and finance. They may else have someone assist them, in order to drive business success and growth, as well as monitor their company’s financial health.
Finance is held in low esteem by the majority of startup entrepreneurs. Finance is a back-office, non-revenue producing activity that is not critical in the early phases of a firm, according to the logic.
However, this might be a major blunder. Finance is far from being a purely back-office activity that does not create money.
The majority of startup entrepreneurs make the mistake of ignoring money, which may be quite costly to their company.
Startup entrepreneurs must have a basic understanding of finance and accounting for two reasons: one, to keep up with what is going on in their firm in terms of performance and outlook, and two, because they cannot afford to engage a financial specialist in the early stages.
If entrepreneurs are having trouble mastering money at the level necessary to manage a firm, they should hire a skilled finance expert. If a startup’s founders don’t have the funds to hire a financial staff, they’ll have little choice but to do it alone.
Finance knowledge or expertise, at least part-time or virtual finance, is necessary in this catch-22 position to assist entrepreneurs in meaningful interactions with possible partners, investors, auditors, authorities, workers, consumers, suppliers, and other internal and external stakeholders.
Managing costs, cash flow, invoicing, vendors, collection, taxes, and payroll are likely not what startup entrepreneurs envisioned when they chose to establish their own company. Neglecting these vital activities, on the other hand, is akin to committing business death.
With the help of accounting and finance, entrepreneurs can:
1) Understand assets and liabilities well.
2) Make strategic business decisions by using profit and loss statement (Income statement in the US), balance sheet, and cash flow statement data.
3) Get the company in shape for fundraising.
4) Get the company ready to manage expenses, cash flow, and hazards.
Accounting and finance have an impact on practically every aspect of a company’s operations. Accounting is the foundation of everything you do in business, whether you’re applying for a business loan or grant, managing payroll and employee benefits, paying expenses like rent and utilities, invoicing vendors, pricing your products or services, seeking investors, projecting growth, invoicing customers, and collecting money. A business is bound to suffer losses and may also fail if anentrepreneur fails to give accounting and finance due importance.