Ep 44 Know Your Numbers #entrepreneurialtip

Welcome everyone to the 44th episode of Professor P's Podcast. This week I am bringing you another entrepreneurial tip. The topic for this show is KNOW your NUMBERS! #entrepreneurialtip

Managing your money and knowing your numbers are instrumental in the control and success of your business. You will need to ensure you take great care of your financial matters. It is wise to bring in help with your financial matters. Consider hiring a certified public accountant (CPA) or bookkeeper, or use an online service. A CPA will typically cost more than online services but can normally offer more tailored services for your specific business needs. A bookkeeper can provide basic day-to-day functions at a lower cost but won’t possess the formal accounting education of a CPA.

Learning how to manage your money is a must. If you don’t know how to manage your money, then you surely will not know how to manage a business’s money. Poor financial planning and managing of funds is one of the main reasons why businesses fail.

Did you know the wealthy have a language all their own? Well, they do. They understand the true meaning of assets and liabilities. They speak stocks, bonds, mutual funds, and securities. They pay attention to the flow of money not only in our country but the world. Therefore, if you are going to go from startup to success, you will need to understand the language of the wealthy.

There are a few financial reports I want you to become familiar with: the income statement, balance sheet, and cash flow. In the back of the book, I have given charts for you to see what each one of them looks like. The income statement is a financial report that measures the financial performance of your business on a monthly or annual basis. The income statement tells you just that: how much income (profit/loss). The balance sheet is a financial report that shows what the company owes and what it owns, including shareholders’ stake.

The balance sheet has a particular formula which, again, must be balanced. This is the fundamental accounting equation: Assets = Liabilities + Owner’s Equity. The balance sheet is going to show you the big picture, help you measure the value of your business, and can serve as an early warning sign. The cash flow statement is a financial report that details the inflows and outflows of cash for a company over a set period of time. You always want to be aware of your cash flow. Cash is king. I need you all to take a managerial accounting class or a basic accounting class. You can even search on YouTube for classes that can teach you the basics.

I make all my students track their money. This is one of the best ways to figure out what is really going on with your finances. The longer you can track, the better. I have my students’ track for two weeks. However, I would say that if you can track for a month up to three months, you will have some good data. You must track it to the penny. Always keep a little book with you and don’t miss one cent. Seriously, to the penny. Once you have tracked your money, you will then need to reflect and have a come-to-Jesus moment with yourself. Now, if you are already savvy and smart with your money, that’s great; I would still ask you to see how you could level up and become even wiser. You are all my students, so now you have the homework to track your money and face the music!

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