Four Benefits Of Having Your Financial Data In Order
You could have an idea and be pre-revenue, generating
just enough to cover your burn rate each month, or you could be a
profitable business and looking for capital to grow. Regardless of where
you are, the importance of financials does not change.
As humans, we tend to focus our attention on the things that bring us the most pleasure and least pain. It is probably no wonder that most entrepreneurs and emerging companies tend to focus on daily tasks and projects which bring them joy, have the least amount of resistance and sometimes make them money. However, the key to business growth comes in the ability to be a storyteller and the main character in that story is financials.
Christine Sing, a Finance Expert from Michigan, United States, offers words of wisdom when it comes to having your financials in order:
“I know full well that few entrepreneurs start a new business because they love keeping their financial statements in order,” Sing said. “Friends, it is a necessary evil and a critical business discipline to springboard your company to the next level. Please take this seriously; your business is counting on you!”
Here are the top four reasons to have your financials in order:
1) Financials are the price of admission
Whether
you like it or not, you are going to get asked for them. Startups will
need projections, which are a forward-looking version of your financials
based on a series of assumptions for the purposes of pricing a round of
funding. For any venture capital or more traditional funding, including
bank loans, you are going to need to illustrate the state of your
business and your financials are the truest picture of this.
2) Financial statements are the language of business
Quite often being able to speak into the listening ear of an investor or funding source is one of the key aspects of communicating effectively. Owners, Investors, Managers and other interested parties need financial information to make decisions. Because accounting is used to communicate financial information, it is often called the language of business.
3) The balance sheet is the thermometer
The ability to provide financials with accurate information is similar to being able to present a business opportunity or write a proposal that is easy to understand with proper grammar and punctuation. When you can demonstrate you can speak the native language of business to your funding source, they will gain more comfort and confidence in your business idea.
4) Cash is king
Understanding how you make money and where you are making it from is important to your conversations with investors. At the end of the day, cash flow is important and your ability to identify key metrics in your business financials is an important part of the process. Your ability to understand how you will generate cash for the business to cover expenses and ultimately generate a profit for the investment is critical to any conversation.
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