As a business owner, it’s important to be able to understand various financial terms. You’re going to be hearing certain terms a lot and you should be familiar with them so that you don’t make mistakes due to misunderstanding a phrase. Read on to examine some of the basic financial terms that you should familiarize yourself with.
Accounting is a term that you probably know already, but this refers to counting your income and expenses. There are two subcategories of accounting known as cash accounting and accrual accounting. With cash accounting, income isn’t added up until you’ve received money and expenses won’t be deducted until they have been paid. Accrual accounting is different because it counts income and expenses when they occur.
The term assets refers to things that your company owns that are worth something. There are various types of business assets and they can be split between two categories. Fixed assets are ones that are intended for long-term use that you won’t likely be selling anytime soon. Current assets are ones that will likely be converted to cash within one year.
Bookkeeping is a term that goes hand-in-hand with accounting. Businesses use bookkeeping as a way to keep a chronological log of your transactions. Some people use software to help with bookkeeping responsibilities, but you can also do this by hand.
Depreciation is a term that refers to an asset losing value over time. For example, a vehicle is going to depreciate in value as it gets older. The same can be said for technology assets such as laptop computers.
A general ledger is what you use to track your daily or weekly account balances. Businesses need to track account balances, credits, and debits very carefully.
Income is the money that is coming into your business through sales. You might have cash income and you could also extend credit to customers who will pay you at a later date. All of this money that is coming into your business is income.
Liabilities are the debts that you have to pay. This will include multiple things such as business loans and the wages that you are obligated to pay out to your employees.
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Do you want to make sure that you hire the best workers? It’s important to approach the hiring process in the right way so you can get the employees that you need in the right positions. Examine the following five keys to successful hiring so you can make the necessary changes to meet your hiring goals.
- Focus on Writing Better Job Descriptions
Some companies make the mistake of not focusing on job descriptions, and this leads people who aren’t a good fit to apply for various positions. You should describe what the job is all about and how you want it to be done. This will make it a lot easier for you to find an ideal job candidate, and it shouldn’t take a lot of effort to create better job descriptions.
- Consider Your Values
You shouldn’t simply hire job candidates because they have the right experience to fill a job opening. It’s also prudent to make sure that the values of any potential employees line up with your business values. An employee will be able to do better in your company if they understand what you’re all about and share the same core values. You should always try to find people who will fit in with your work culture.
- Consider Assessment Tests
It’s worthwhile to consider making use of assessment tests to improve your hiring process. Many businesses find that interviews are too subjective, and you will want to be very careful when hiring people for senior management positions. Assessment tests can be a useful way of gauging someone’s skills. This might not be practical for hiring entry-level employees, but it’s solid advice when you’re looking for managers or other types of leaders.
- Honesty Matters
Honesty matters. You should try to find candidates who approach things with this mindset. You don’t want to hire someone who spins things to make themselves sound like they’re perfect. Everyone has flaws, and the best workers are often comfortable admitting their weaknesses. Past mistakes can help to inform future successes, after all.
- Avoid Trying to Sell Your Company
Don’t try to sell your company to attract potential job candidates. It’s better to have an honest discussion with job seekers about your company, the goals of the company, and what you expect out of employees. This process is about seeing whether your company is a good fit for the job seeker and vice versa. Keep this in mind so you don’t wind up hiring someone who isn’t a good fit or doesn’t truly want to work for your company.
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If you’re an entrepreneur, then you should be familiar with the concept of burn rate. This is basically a way to measure the overall sustainability of your business. It helps you to determine how long your company can keep things going until your sales start to go up. Often, this term is used for startup companies who are trying to calculate paths to viability.
The reason why the term “burn rate” is used is that it’s about how fast you’re burning your resources. If you’re burning through money without replenishing that money with sales, then you have a very high burn rate. This rate could put your startup company out of business if you don’t get things under control. It’s imperative to try to understand the burn rate so that you can calculate things and make educated decisions.
Why Is Burn Rate Important?
Burn rate is important because it gives you a good idea of when you’re going to run out of money if things don’t change. Also, it’s an important metric when you’re trying to attract investors. If you want people to invest in your company, then you might need to be able to prove that your burn rate isn’t incredibly high and that your company isn’t in danger of collapsing soon. It’s a measurement that you need to pay attention to for sure.
How Do You Calculate Burn Rate?
Calculating the burn rate isn’t all that hard. The easiest way to do this is going to be to focus on quarters when making the measurements. Determine the difference between your starting balance during the quarter and the ending balance. You then need to divide by the number of months to determine how much money you’re burning through monthly.
This will show you how much money you will need to make to keep your company in business. You should use this measurement to inform your decisions. Knowing your burn rate can help with budgeting while giving you a visualization of why you need to improve sales. You should start calculating your burn rate right away so that you can use the information wisely.
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Women are a huge part of the business world, but many of them have a tougher time finding success than their male counterparts. This isn’t due to a lack of skill and many women are well-suited to be in leadership positions. Women have to overcome biases and fight stereotypes so that they can succeed. Take a look at the following tips for women in business that might help along the way.
Showcase Your Leadership Potential Even at the Entry-Level
Even if you’re in an entry-level position right now, it’s going to be beneficial to act like a leader. Help to motivate others and be the hardest worker in the room. Your natural leadership skills will shine through and you’ll be able to prove your worth to your company. This will help you to stand out from other employees and it could lead to career advancement sooner than you might think.
Be Willing to Step Out of Your Comfort Zone
You should be willing to step out of your comfort zone so that you can find business success. When you do things that you aren’t necessarily comfortable with, it can help you to find new talents. You might discover that you’re able to do more than you thought and this could lead to increased business opportunities. Being brave enough to step out of your comfort zone when necessary could be the first step toward bigger things.
Work on Your Negotiation Skills
Negotiation skills are important when you’re a woman in the business world. You need to be able to negotiate to get what you deserve and if you don’t have these skills, then it could leave you in a bad position. Work on getting better as a negotiator so that you can improve your salary and standing in a company. You also have to be proactive about getting the credit that you deserve for various work projects.
Build Relationships Outside the Office
It can be very beneficial to work on building relationships with co-workers and staff outside the office as well. You want to have strategic allies so that you can climb the corporate ladder swiftly. Also, it’s helpful to focus on networking opportunities when they present themselves. Sometimes having contacts outside of your company can put you in a power position.
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You want to be able to make sure that your business operates smoothly. One part of making this happen is going to involve creating a budget and adhering to it. Creating a budget for your business isn’t difficult, but you still might not be entirely sure what you should do. Read the information below so that you will have a guide to follow when creating your business budget.
Determine Your Monthly Cash Flow
The first thing that you should do is determine your monthly cash flow. Do your best to analyze your business properly so that you can make an accurate assumption about how much cash you will be bringing in this month. This is going to play a big role in determining what your monthly budget should be, so take your time on this step.
Take a Look at Your Expenses
Next, it’s going to be time to examine your monthly expenses. This will include any utilities that you need to pay as well as supplies, vehicle expenses, advertising expenses, and payroll costs. Some expenses might not occur each month and will only need to be factored in during certain times. For example, you might upgrade equipment once per year or you might only need to order certain supplies on a bi-monthly basis.
Ensure That Incoming Cash Flow Is Greater Than Outgoing Cash Flow
Now that you’ve taken the time to compile the right information, it’s time to budget things out. You need to make sure that your incoming cash flow is greater than your outgoing cash flow. If your expenses are greater than your sales, then you’re not in a good position. You might have to make changes to your budget and cut certain things out to ensure that things remain stable.
Your Ending Balance From the First Month Carries Over
Remember that your ending balance from the first month carries over into the next month. You can use this balance to help cover months that might be more expensive than others. Do your best to balance things out and try to save as much money as you can so that you can weather months with poor sales. Most businesses will encounter hard times at some point and it’s best to be prepared.
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Being a leader is a huge responsibility and you want to make sure that you’re able to do the best job possible. There are certain fundamentals of leadership that can help you find success in your new role. Take a look at these leadership fundamentals that you should be focusing on. If you can develop as a leader while focusing on these things, you’ll be more likely to succeed.
Understand Your Purpose as a Leader
You should do your best to understand your purpose as a leader. Leaders are meant to guide others and ensure that they are able to succeed in their jobs. Sometimes you’ll need to provide help, and other times, you’ll need to teach workers. Recognize what you need to accomplish and make sure that you communicate expectations to your employees clearly.
Focus on Building Relationships
Building relationships with employees is another very important part of being a leader. You need to form strong bonds with your team so you can work together effectively. If your team trusts your leadership and knows that you will do everything in your power to do a good job, you’ll be on the right path. Be an empathetic leader who understands how to listen to others while also knowing when to take charge of a situation.
Know That Your Values Matter
Your values are much more important than you realize. It’s not going to be good if your team starts to think of you as someone who doesn’t have any integrity. Stick to your values and never compromise them. You might make mistakes sometimes, but you can be strong enough to own up to them while committing to work harder.
Develop a Sense of Community
Developing a sense of community is another thing that you should focus on. When workers feel a sense of community in the workplace, it makes them more likely to give it their all. Make sure that the work environment you create is positive and do your best to provide workers with the right resources. Facilitate good communication between staff members and be there to help solve disputes responsibly.
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It’s a great time to think about starting a new business in Ireland. Many people are looking into startup companies right now because of the availability of helpful programs and government support. If you’re considering starting a business in Ireland, you might be curious about which steps you need to take first. Explore the information below so that you can have the best experience.
Picking a Legal Structure for Your Business
The first big step involves picking a legal structure for your business. You need to decide whether you want to be a sole trader or if you’re going to be a limited company. Setting up your business as a sole trader is decidedly easy, but you’ll be liable for all debts, and as such, it can be somewhat risky for your personal finances. A limited company will be more complex, but you get a much better corporate tax rate.
Registering Your Business
Next, you’ll need to go ahead and register your business. Those who want to go the sole trader route will need to register their businesses with the Revenue Commissioners for tax. Limited companies will need to register with CRO first. Remember that certain types of businesses also require special licenses from local authorities.
Working on Building Your Brand
With the legal aspects taken care of, you’ll be able to focus on building your brand. You want your brand to be recognizable and you want it to represent your values as a company. It’s important to think about your messaging as well as the color scheme that you’ll use. Try to maintain a consistent branding for everything that you do because you don’t want your website to look vastly different than your advertisements or your physical storefront.
Securing the Necessary Funding
Securing funding is also necessary if you’re going to start a business in Ireland. Look into which government options your company might be able to take advantage of. Things will differ depending on whether you’re operating a limited company or are a sole trader. There will also be private programs that you can turn to for assistance.
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Cash flow problems have the potential to put your business in a very tough spot. If you don’t have enough cash to cover certain costs, then you could be panicked about what you should do. One thing that business owners can consider is purchase order financing. Read on to learn about what purchase order financing is and why it might be a good idea for businesses with short-term cash flow problems.
Understanding Purchase Order Financing
There are purchase order financing companies who give out money to businesses like yours. They can give you cash for your business in exchange for collateral. In this circumstance, the collateral that you’re using will be orders. The orders that you have coming up can be used to get the cash that you need now and you’ll be able to pay things back with interest.
It’s important to note that most purchase order financing companies don’t pay for 100% of the order. They will expect your business to contribute something and it will usually take one or two weeks to get purchase order financing. This means that it will be a good option in some circumstances and an impractical one in others. If you require cash faster than one or two weeks, then purchase order financing isn’t like a good fit for you.
How to Use Purchase Order Financing Properly
Many businesses use this type of financing to help keep things moving along with orders. For example, you might need to pay a supplier to be able to fulfill an order. The lending company can pay the supplier on your behalf so that the order can be fulfilled. You can then bill the customer as normal and you’ll simply have to pay the purchase order financing company the amount of the loan plus any interest that you owe.
This isn’t a loan that you’ll be able to use to fund services or to help with your general business operations. It’s really only useful for orders and keeping things moving along with that. You also need to understand that this will be a short-term solution to your problems and that using this financing too often will be counterproductive. It’s a good resource to be able to use in a pinch, but it’s only practical when approached in the right way.
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Many small businesses encounter situations where they need money and have to find a way to get it. Lending standards can be somewhat tight in many places and this makes it difficult for some business owners to secure financing. There are going to be two basic avenues for business owners to travel when looking for financing. Equity financing and debt financing are the most common options, but which is better for your business?
Understanding Debt Financing
Debt financing is a term that refers to taking on debt to finance some type of purchase. Using a credit card to pay for an item or taking out a mortgage to buy real estate are both considered to be debt financing. This is going to be one of the most typical ways that a business will try to finance a purchase. A business owner might try to go to a bank to get a business loan that will make it possible to purchase something important for the company.
For most business owners, debt financing is going to be very advantageous. Your lender won’t gain any control of your business or assets and you can pay them off over time. The only danger with this method is that there is the possibility that your ability to pay back the debt could be diminished due to financial hardships. You’re betting on your ability to pay your business loan or credit card balance off over time when you make this financing choice.
Understanding Equity Financing
Equity financing is different because it involves investors pouring money into your business. You can offer shares of your business to investors so that you can get the money that you need. The one big advantage to this type of financing is that the investor is taking on all of the risks. Of course, the downside is that you will be losing a certain amount of control over your company due to giving away shares to these investors.
Which Option Is Best?
Most small businesses will choose debt financing instead of going for equity financing. Equity financing is useful if you are worried about taking on debt or if you’re having trouble securing necessary business loans. Both of these financing options have a place in the business world and they can both work out very nicely. It’s just important to weigh your options and consider whether you want to give away shares of your business or if you’re better off dealing with a bit of debt.
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Climate change is a gigantic problem that is looming very large in people’s minds. Everyone is becoming increasingly worried about what climate change is going to mean for the planet, and people are finally starting to seriously think about how to solve the issues humanity is facing. Sustainable business practices are going to play a huge role in saving the planet, and it’s important for companies to recognize what needs to be done. Take a look at the potential impact of sustainable business practices by reading the information below.
Changing Business Practices
Changing business practices is a necessary part of combating climate change. If things remain the way that they are currently, the world will continue to hurtle toward the worst-case scenario when it comes to climate disaster. Companies need to work hard to reduce their use of fossil fuels while also coming up with sustainable business practices. This is going to take ingenuity, dedication, and hard work.
The first step to take is to examine your business practices and determine what can be changed to push your business toward becoming more sustainable. There are simple things that businesses can do such as eliminating plastic products, being mindful of energy consumption, and committing to recycling initiatives. Look for other ways that your business can become sustainable and try to commit to making the necessary changes. Some changes might be difficult, but it’s necessary for everyone to work together to solve this massive global problem.
Inform Your Employees
Inform your employees about your commitment to combating climate change. It might actually be helpful to have large group discussions about sustainability so you can come up with new ideas. Your employees will play a big role in ensuring that your business succeeds with this initiative. Give your employees the resources they need to learn about sustainability and be ready to answer any questions they might have about the process.
Set Yourself Up for the Future
Sustainable business practices have the potential to help the world avoid the worst possible scenario when it comes to climate change. It might take time for all of the businesses of the world to adapt to these new expectations, but this about the future of the planet, and every company needs a healthy planet to be able to keep moving forward. Set yourself up for the future and take action now.
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