As aspiring businesspeople, it is always important to learn the discipline of bookkeeping. Bookkeeping means keeping records of the financial transactions of a business. Bookkeeping is helpful in ensuring that funds generated from the business are easy to track and manage. There is no business that starts with the intention of making losses. However, without proper structures and organisation for keeping and tracking financial transactions, the business is bound to fail. That is why it is important to have a clear outline, showing all expenses incurred and revenues earned over a period of time. Even in one’s personal life, it is important to plan for our expenditure. The human need to maximise utility and meet individual desires makes it tempting to spend recklessly. However, spending without planning becomes impulse buying and interferes with a person’s budget. This might mean reorganising spending or getting into debt to meet our obligations or fulfill our preferences. In the words of Benjamin Franklin, “beware of little expenses. A small leak will sink a great ship”.
Thus, in the journey of entrepreneurship there is always a struggle to separate the business from the owner. Owners who spend money meant for the business for personal use encroach on their capital and the overall wellbeing of their business. This then makes bookkeeping a critical component of any start-up. The principles of bookkeeping emphasise that a business owner must have clear guidelines showing how their financial transactions should be documented and kept. This includes sales, expenses and profits. It is important that periodically, preferably at the end of each month, records of these transactions are reviewed to understand how the business is performing. This will make it possible to identify where the business is not doing well and make decisions for improvement.
Bookkeeping discourages entrepreneurs from unnecessary spending. Prudent spending makes it possible to reduce reliance on debts and thus retain the funds needed by the business, both for day to day operations and for business growth. It is recommended that profits gained should be ploughed back into the business, especially at the initial stages so that the business can grow and still have some funds saved for a rainy day.
Lastly, it is always important to remember that as a start-up, the financials may not look as good as you had anticipated in your “dreams”. Do not give up. Instead, work on ensuring financial discipline through bookkeeping. No business starts with everything figured out. Like Steve Jobs said, “I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance”. Determination is key to achieving financial success. However, the most successful businesses have their financials figured out with lots of discipline and rigor.
We are Entrepreneurship Journey understand the important of keeping records on financial transactions and keeping in check, the expenses of the business. Hence, our mentorship programme emphasises the need for keeping good records, analysing these records and use them to make decisions that affect the business. We equip our mentees with tools required to analyse both sales and expenditure.