To run a successful business, you will need to create a business plan. A business plan outlines how you intend to make and spend your money. It also helps you predict if there is a market for your product and how much you could make from your market. Once you have your plan in place, you will need to:
- Choose your legal structure (choosing how you are going to operate as a business).
- Manage your revenues (customers buying from you)
- Manage your expenses (you pay your vendors)
- Generate financial statement
More details are given below:
Choose your legal structure
When you open your business, one of the first things you need to do is create a legal structure. There are 3 main types of legal structures namely:
Click the link to read on each type of legal structure. The way information is tracked in each legal entity varies a little – we will discuss that in more details.
Manage your revenues: Customers come in to buy from you
When customers comes in, you either write them a sales receipt or you send them an invoice if you allow them to buy now and pay later. You can choose to manually keep track of your customer sales using a daily journal. Alternatively, you can choose to use software. Some common invoicing software are;
- QuickBooks
- Freshbooks
- Excel Templates
The money you receiving from customers is called revenue
Manage your expenses: Pay vendors to get the products or services you need to run your business
Paying vendors can also be done manually using a journal or it can be updated using software. Assuming your system is computer based, the transactions will be recorded as the events happen. So for instance, when a customer comes in to buy a product, you as the business owner will ring up the sale on your computer system. The computer system automatically records the entry. Also, when you pay your vendor, you write a check using your computer. Using software on a computer automates a lot of steps involved in entering daily transactions.
Generate financial statement
At some point as a business owner, you will like to know how your business is doing. If your system is computer based, you can pull up the reports from your financial software. The reports you pull are called financial statements. We will discuss types of financial statement later. However, if your system is manual, you will have to give your journal to your accountant to generate the financial statement.