Being a Jefa not only means you lead your business, but you also have to wear many hats that help you successfully operate it. As an entrepreneur, I have learned how to run my marketing, sales, operations, tech, and even accounting of the business, and let me be honest, that was the most important one. In every part of my education, from my Bachelor’s to my Masters, I have had to take many accounting classes to understand how businesses navigate their finances and reporting and learn if the company is profitable. As a first-gen Latina, running a business can be intimidating because you feel like you are paving the pathway for yourself and your family. Because of this, there’s a lot of pressure to make sure your business succeeds. So, as my way of paying it forward and relieving some of that pressure off of you, I will break down five accounting skill sets that I have learned to help me understand my business and its finances. Hopefully, these tips show you how important it is to get a foundation in accounting before you become an entrepreneur.
1. Track Your Business Income & Expenses
When running a business, you must separate personal and business finances to ensure transparent reporting. You can manage your business income and expenses using a worksheet or accounting software to track everything automatically. We call it bookkeeping. From invoices to receipts, this is crucial to understand and apply to your ongoing business practices.
2. Take Advantage of Tax Deductions
As a business owner, you have many tax benefits that can help reduce your tax liability (what you pay to the government) every year. Some tax deductions that business owners can take advantage of are:
- Office Supplies and Furniture
- Auto Expenses
- Meals and Entertainment
- Software and Subscriptions
- Travel Expenses
- Work-related Education
These are just a few items you can use as tax deductions. By earning a degree in accounting, you can learn how to make sure you are filing your taxes correctly and maximizing your deductions to keep more money in your pocket. To learn more about the benefits of understanding accounting, visit Accounting+.
3. Understand Your Financial Reports
The profit and loss statement is what we in accounting call an income statement. This statement lets you see how much sales your business earned, operational expenses, taxes, and depreciation that occurred during a period. I recommend reviewing this report monthly and quarterly because one of the most critical data points in this report is net income. This number helps dictate if you are making or losing a profit in your business. As a business owner, the goal is to have a positive profit, but it is common for start-up businesses to have a negative profit for the first three years.
Business owners often overlook the balance sheet because many don’t understand what this report is. This report helps you understand your business’s assets, liabilities, and equity. The formula you should never forget is ASSETS = LIABILITIES + EQUITY. I learned this one in my undergrad, and it can also help you pinpoint if something is wrong with your books when it balances. The balance sheet can show if you have more debt to assets or how much cash you have in the business during any period. It’s a good representation of the health of your business versus an income statement focused on sales, expenses, and your overall profit. If this sounds like something you want to build your skill sets on go to https://www.joinaccountingplus.com/ to learn more about accounting!
4. Be Analytical to Create Strategies for Your Business
Not only do you need to understand your financial statements, but being analytical is an important soft skill to have as an entrepreneur and build strategies for your business growth. You always want to be able to review and analyze your business in order to ensure you are taking the best steps to grow it. Whether it’s understanding your business’ strengths and weaknesses, reviewing your past quarter reports or even looking at how you can add a service or product to make more sales. Being analytical allows you to also explore other options or ideas to ensure that you make the best CEO decisions for your business.
5. Set Up Your Financial Budgets and Forecasts
Now one of the most crucial skills to have as an entrepreneur is creating and running financial budgets so you can plan your profits and expenses and have an overall idea of your finances. Similar to your personal finances, your goal is to understand how much you spend on monthly expenses to ensure you know how much profit you will have to make for the business. Once you start getting an understanding of your budget, you can start predicting your business growth with forecasting. This part is the most fun, in my personal opinion! You get to see if your sales grow by percent and how that would impact your business profit. This part always gets me motivated to outperform my forecasts!
All in all, being a jefa is no joke, but being well-versed in my skill sets has really helped me understand all aspects of my business. Learning accounting and understanding your finances can shed light on much more than just the surface-level numbers you see in your bank account. Understanding your financials can get you access to grants, loans, and other lending opportunities that could help take your business to the next level!
Hope these tips helped! To learn more about accounting and find more resources visit the Accounting+ website.