How the company runs financially is the most important thing for the entrepreneur. Does the work we do lead to a full income and a healthy business?
Availability of up-to-date financial data is absolutely “a must” for a profitable business model. Only then is the result of our daily work and decisions visible. That is why it is imperative that the financial data is kept up to date so that it is clear on a weekly basis how the company is running financially.
There are 2 books in accounting that provide insight into this.
In the Profit and Loss Account; we find the income of the entrepreneur, the profit and the way in which these are generated.
In the Balance; we find the total assets used to run the business. The value of the company. This can consist of Equity and Debt Capital.
The Balance Sheet is the bag of money, the assets owned by the company. Depending on the business form, this bag is also owned by the business owner. This is the owner's piggy bank, which he/she has received from the previous generation and passes on to the next. Among other things, a difference is made in Debt and Equity.
In the traditional form of accounting, the household income is the result of the Profit and Loss Account and is listed at the bottom as “Entrepreneur Surplus”, or “Entrepreneurial Result”.
With that put or rather; the entrepreneur allows himself to be paid last through the accounting method.
This while in reality the business operations are totally dependent on the entrepreneur. If he/she doesn't get out of bed in the morning to milk and feed the cows, things will go wrong in no time. If he/she does not act as a guarantor, there will be no loan from the bank.
In other words;
The entrepreneur is the most important person in the company.
That is why I advocate putting the entrepreneur's income at the top of the list of expenses.
The result of dealing with business operations in this way is that the entrepreneur is not the final piece, but the BASIS! The income is then always secured!
Immediately after that come the financial obligations. Then the other costs. The other costs are therefore limited. They now suddenly form the final piece of the bookkeeping.
This means that a budget is drawn up in advance for the coming year. What do we expect in terms of turnover and how are we going to achieve that with this limited amount of money.
That's entrepreneurship!
This is the money supply that is available to run the business and realize the above-mentioned turnover.
This way of working places the bookkeeping at the center of attention. So that decisions are made based on that.
In Course package; Business management, which is also part of the Nature Inclusive Agriculture course; PG NxT STEP® we pay a lot of attention to this. Because in the end it is all about making a good return!
Good luck!
Ado Bloemendal
