Where do you start when you want to navigate the technicalities of running a business financially?
As a startup entrepreneur, you need to constantly monitor the financial health of your business. In addition, you will most likely interact with banks and lenders, investors, or other business partners. In all these cases, financial vocabulary is very important for Towing San Jose entrepreneurs.
The most common financial concepts for towing entrepreneurs
Cash flow
This is part of financial planning and is one of the basic elements of a successful business. It shows, over a period of time, all the cycles of your business, i.e. the high and low points, when cash comes into the business, and when it goes out.
Turnover
This is the number of sales of products/services in a certain period. Constantly monitored, it helps you have a better understanding of the evolution in relation to other similar companies on the market, growth over time, etc.
Operating profit
It is the profit the company makes from its core activity. It is calculated by subtracting the total expenses from the total revenues of a company without taking into account taxes, fees, etc.
Gross margin
This is the percentage of the company’s turnover, after deducting the cost of production or acquisition of the goods and services sold.
Debt ratio
This is the comparison between equity, money available to the entrepreneur or obtained from investors in exchange for a stake in the company, and liabilities.
Capital expenditure or investments
For example, if you buy a high-performance laptop or renovate your premises to make them more attractive to customers, you are recording expenses now that will create benefits for the business in the future.
Degree of concentration
This is an indicator usually expressed as a percentage that measures what percentage of business you do with a particular customer or supplier.
Principles of financial management
The golden rule in business is not to mix personal money and business accounts. This rule allows you to protect your savings and also see if the business is one that brings you profits or the opposite. But most importantly, you won’t get into trouble with the tax authorities and you won’t be sued.
This rule also applies when you use personal things for business purposes. It’s important to keep track of them. Most small business owners use their personal car to get to all kinds of meetings, but also to do many other things. Don’t forget to consult with your accountant and determine together which expenses are deductible, so you can share the cost of car maintenance. The same goes for your mobile phone or other goods.
