Here’s how to ensure that you know the basics of accounting as an entrepreneur
By CA Anuj Jalota, Founder – AJ Education Next
With widespread access to the internet and reduced information asymmetry, great business ideas are easy to come by these days. Unsurprisingly, India is home to over thirty-seven thousands startups. But as great idea, and even great implementation, aren’t everything when it comes to guaranteeing the long-term viability of your business. The key lies in ensuring that your business maintains a healthy P&L statement in the long run. This is more than just keeping profits and expenses in check. Every successful entrepreneur needs to be able to play the role of an accountant and understand cashflows, tax implications, and so much more. But learning the fundamentals of accounting doesn’t necessarily mean that you have a formal education in accounting. In this article, we’ll walk you through some of the ways that entrepreneurs can easily attain the fundamentals of accounting to ensure a long-term sustainable business.
- Work with a professional accountant
Many new entrepreneurs make the mistake of believing that they and only they are best and capable of managing all aspects of the business. In many cases this might be true, especially at earlier stages in the entrepreneurial journey. But accounting and maintaining a healthy P&L are areas where professional support can be a gamechanger. Working with an accountant affords many benefits. It’s not just about handling of this particular function by a professional, an accountant will educate you about legal compliance, will force you to formalize transactions and to engage in healthy practices (such as only expensing out of your business’s current account). They’ll also be able to red flag decisions and situations by bringing them to your notice before you become aware and before poor financial planning could have a negative impact on your business.
- Learn by doing
This is a key skillset that every entrepreneur should have. Business is the art of doing and every entrepreneur needs to develop the capability to succeed in each functional role. Because not many entrepreneurs have a formal background in finance or accounting, this often means learning on the job. Free online courses and instructional videos could help you develop a foundational understanding of profit and loss, different types of expenses, tax compliance, and other key factors critical in maintaining healthy accounting books.
- Take a class!
This is a great option for entrepreneurs who either want to retain a major role in overseeing their accounting process or who are working with products and services that are closely aligned with the finance sector. If you don’t have formal accounting skills, basic CA coaching or tutoring could be a brilliant option to hone your accounting skills. Most CA students take classes with the aim of appearing and succeeding in competitive exams. As an entrepreneur, this isn’t going to be your objective. Rather, by listening into classes, studying CA material, and understanding key concepts in your own time, you’ll gain a powerful foundational knowledge of accounting. The theory instilled in these classes will help inform the financial decisions you make in your business, ensuring healthier long-term outcomes.
Business isn’t about great ideas alone. It isn’t even about putting great ideas into practice. It’s about doing all that while making sure your finances stay in the black. A healthy P&L statement is key to a successful business. And learning core accounting skills is the single best way that new entrepreneurs can ensure long-term financial stability for their businesses. Investing in accounting isn’t just about investing in a process or skill: it’s investing in your long-term business viability.