Only a small percentage of people actually understand their accounts! The global economy maybe showing signs of recovery but the depression is far from over and fears of a pull back on recent growth still linger in the back of the mind. Indeed, another financial crisis might be just around the corner, and before it hits we think it is time to know exactly what you should be doing to protect your business against future events.
What you need to know about basic accountancy
Businesses and consumers should have an understanding of their accounts and at least a basic knowledge of accountancy. Firstly you need to build a complete picture of your total income to the total expenditure and that incredibly important and elusive figure of disposable income.
However the disposable income should never just be considered ‘spending money’. Think of the bigger picture! A percentage of this important figure should be saved, a portion used for future build, and then a small amount just used as free spending. Savings should be the bigger portion as this will carry you through financial turbulence.
Future build is about expanding and developing. If you are an SME owner, do you have any plans to fall back on if your product or service loses its demand? This pot of gold is for you to invest in diversifying your business. If you are an employee or self-employed, do you have a plan if you are made redundant or a greater income.
You should also put some spending money aside, but keep this sum to a minimum – don´t overstretch your budget. The less you spend here means the more you are developing your future or creating a pot of gold to look after yourself through lean financial hardship.
When do we need to get help to deal with the more complex accountancy issues?
If you are self-employed, you are entitled to tax breaks on your income, but a lot of business owners do not realise where they can save money. For example, if you work from home, you can claim gas and electricity as a business expense. An accountant will be able to help you work out all of these possible and helpful tax deductions.
You may also need a financial advisor or broker if you are investing in a retirement fund or any other type of investment. Try and keep your investments safe, but remember some people liken investing to gambling, so only invest what you can afford to lose if the worst should happen. Remember, if you see a profit in your investment cash it in unless you are sure it’s worth holding for a bigger profit.
Understanding your finances does not have to be complicated. It is important to simplify things so that you know exactly what you can afford to do and what your goals are for the future. If we had a little help and advice, we could be preparing for the unexpected and still living for the moment. For individuals and SME’s alike it’s time to prepare for the future and get ahead of your peers. You will understand what percentages of the disposable balance should be saved and what should be used to grow your businesses and investments.
Be proactive with your finances and set yourself clear goals for the future.
The above article has posted by Amy Lewis, owner of the finance corner. For more details about Amy you can visit her social media profiles in below mentioned urls: