Do Business Well

After your business has opened, your accountant should:

• Set up a mechanism to record your daily business transactions e.g. sales, cash receipts, purchases and all expenses.
• Open a set of books (now recorded on your computer) e.g. cash book, journals, petty cash etc. This will most likely entail the purchase and installation of a software package suitable for the recording and presenting of your financial results.
• Arrange to present your accounts to you on at least a monthly basis. You should receive a package consisting of an income and expenditure statement, a cash flow statement and a balance sheet not more than 10 days after the end of the month.
• You should insist on receiving the following information on a daily basis

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• Explain your assumptions.At some point in the financial section of your business plan you need to explain the assumptions that underlie your projections. That is, how did you arrive at your estimate of general and administrative expenses? Have you worked out a commission structure with your sales reps or are you just estimating the sales costs? And how much of your sales increases come from expanding volume and how much from price increases?

Consider several scenarios. One way to ease the concerns of outsiders worried about your projections being overly optimistic is to provide several potential outcomes. The first would be your expected projections_; the second, a “worst-case” scenario—if there’s an industry recession, here’s how your financial situation would be affected. Third, you may want to include a “best-case” scenario—how things would work if everything went your way. The best-case numbers may look impressive, but they won’t carry much weight with experienced investors. Continue Reading »

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