This week’s readings focused on the financial aspects of starting a venture. It is interesting to note that there was a distinction made between a cash-flow statement and an income statement. Although the article described the basics of the two, I needed a deeper understanding of the difference between the two. I thought that this video on YouTube does a good job of explaining the difference.
and here is a video that explains the cash flow statement in a nice visual manner.
Figuring out the finances of my company is extremely essential and I wish we were introduced to finances a little earlier. This is because, so much of my venture hinges on getting the finances in shape. Right from the estimated profit to the target sales and therefore the size of the consumer base. I feel that knowing this earlier in the venture process, could bring in a little more clarity in terms of defining the business.
Having said that, I have to now restructure some of the elements based on the cash flow. I was initially thinking about stocking 500 lamps at a time in my office/warehouse. But this would not help my cash-flow in any way. I would now restructure this to order the numbers I need every weekend. This would require me to talk to my lamp supplier and convince him of having a continuous supply as opposed to a one time supply.
Another question that pops up is, if I need to hire a permanent accountant / financial manager. I am grossly under-educated in the areas of accounting and finance and definitely need help in preparing these balance sheets. The critical question is in judging what falls into an accrued expense or an accrued income for an income statement. Can I afford to spend enough time doing this? Is it worth the effort? Or should I just go on and hire a full-time accountant? That would mean additional recurring expenses – but it might be worth it in the long run. How do I make this decision? Can somebody give me a few suggestions?
This week’s reading – on the whole – really got me thinking seriously on the finances. Coming from a technological/engineering background, I had – to be honest – downplayed the importance of managing finances. I also learned to appreciate the difference between generating sales and managing your accounts - there is a big difference – managing your accounts in equally important in the long run to the success of your venture as is the act of sustaining sales. And perhaps it is with this ‘awakening’ that I start becoming financially knowledgeable.
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