Planning is the key to any successful business. There are many different models and variations of business plans, so it is extremely important to choose the right one specific to the type of business. Having a business and knowing what to do with it are very separate issues and creating a well-executed business plan for the right reasons will enhance the odds that your venture will be one of the ones to succeed.
“Accounting is the measurement, statement, or provision of assurance about financial information primarily used by managers, investors, tax authorities and other decision makers to make resource allocation decisions within companies, organizations, and public agencies.” (en.wikipedia.org ). Whether you are seeking funding from investors or you are compiling a business plan to serve as a guide for managing your business, it is imperative that you make financial projections. These financial projections will attract investors and serve as a guide to future business decisions. Financial projections can be intimidating. However, they are less a matter of mathematical capacity and more a matter of your knowledge of your business, the industry, and the market. To make projections, such as sales forecasts, you must first break down sales into manageable parts. One way would be to outline the products and services you offer, the unit price for each item, the anticipated inventory, projected sales per item for each day, week, month, etc. You will base these numbers on your experience in the industry and research. Finally, make an educated guess regarding total sales. Using the same procedure, calculate your expenses or startup costs if launching a new business. Use a template or sample as a guide. Estimates, such as sales, are not simply based on knowing the number of people in your demographic region and making an educated guess as to how many will opt to use your product or services in a given time frame. Sales are projected in line with your marketing strategy. The purpose of accounting is to provide the information that is needed for sound economic decision making. The main purpose of financial accounting is to prepare financial reports that provide information about a firm's performance to external parties such as investors, creditors, and tax authorities. Managerial accounting contrasts with financial accounting in that managerial accounting is for internal decision making and does not have to follow any rules issued by standard-setting bodies. Financial accounting, on the other hand, is performed according to Generally Accepted Accounting Principles guidelines.
Many small businesses utilize an accounting system that recognizes revenue and expenses on a cash basis, meaning that neither revenue nor expenses are recognized until the cash associated with them actually is received. Most large businesses, however, use the accrual method. Under the accrual method, revenues and expenses are recorded according to when they are earned and incurred, not necessarily when the cash is received or paid. For example, under the accrual method revenue is recognized when customers are invoiced, regardless of when payment is received. Similarly, an expense is recognized when the bill is received, not when payment is made. Under accrual accounting, even though employees may be paid in the next accounting period for work performed near the end of the present accounting period, the expense still is recorded in the current period since the current period is when the expense was incurred. 1
All organizations have specific goals and objectives that they strive to meet. Top executives devise strategies and formulate policies to ensure that these objectives are met. A corporation’s goals and policies are established by the Chief Executive Officer in collaboration with other top executives, who are overseen by a board of directors. The chief executive officer of a corporation retains overall...