It’s easy to say: Don’t be afraid of pearls! But when your debt piles up, or you see customers haven’t paid you, or when you stand in front of an accountant because you know you have to pay the treasury, your knees tremble, don’t you?
Today I’m going to explain to you in a simple way what accounting is and what a business owner and freelancer should know to take control of their accounts and interpret their results.
“The snake kills itself through the head” How many other traumatic things have you terrified and yet faced and overcome? What power do numbers have that scares you so much?
Fear = ignorance, right? So how to get over it? Find out, don’t avoid the bitter pill anymore!
I promise you “zero” far-fetched language that only an accountant should handle, such as: E.g.: debt ratio, current assets, long-term liabilities, commercial contracts, securities discount, etc.
None of that! Find a beer and relax to read this article. This information is for us entrepreneurs, traders and freelancers.
Wait….I’m going for mine! Health!
What is constability?
Bookkeeping on two plates is the receipt and exit of money. Therefore, accounting in SMEs reflects the money coming in and going out of the operations of a small business over a given period of time.
Of course, what goes in is income and what goes out can be expenses or investments.
The expenses reflect the general business expenses such as petty cash, staff compensation, projects and also the investments you have made. Revenue is the amounts of the bills you collect.
Where should I look for my utility?
You should look for it in the income statement. So you know what you still have in your pocket. How it’s calculated is simple: the total of what you charge – expenses – taxes.
Where can I find the summary of my exercise?
You should look for it on the balance sheet. This report contains three basic indicators: assets, liabilities and equity.
The liability is what is owed and the asset is the credit, like a bill collected. And finally, equity or capital, that is the contributions made by the owner or shareholders of a company, ie what finances the operation.
If you want a more detailed explanation (and I’d say more complicated, hehe), check this link.
What is accounted for?
Well, to make better financial decisions about which projects, products, and services are more profitable, that is, which ones bring me more profit with less cost in raw materials or effort. But also:
- It helps you to know how much is coming in and how much is going out, that is, knowing the income and expenses of your business. You’ll know right away if your cash flow (difference between what comes in and what goes out) is positive or negative.
- To register, classify and summarize the ledger accounts: how much you have earned. If you have sufficient liquidity to cover payments in the short and medium term.
- It shows you what you have and what you owe: knowing the stability and solvency of the company.
- Which project is more profitable? How much does a project or campaign cost you and how much does it bring you? Which project costs you more?
- What project can you complete to make new investments or to cover general expenses (e.g. staff and day-to-day running of the business)?
- It gives you a picture of the company’s results at the time the analysis was conducted.
- To reduce costs, for example if you need to go to a better supplier, I can make better arrangements with him so he doesn’t lose you.)
- Knowing which customers are critical so you can cover your expenses in a timely manner.
[Tweet “Las decisiones que tomes a través de la interpretación de tu contabilidad van a generar mayor productividad en tu empresa”]
It’s important, isn’t it? So don’t let someone else do it for you. Or at least if you have someone in charge of the area, you should at least know what accounting is and take charge of interpreting accounting accounts so you can manage your business.
Would you like examples? Well, I’ll give them to you. First, check out this infographic from FIFA
Now I’m going to show you examples of companies that are closest to us
Company that sells products
Mia’s house It is an artisanal chocolate shop. He has two partners: Marisol and Karla. They started the business by investing in goods to outfit the shop for Fogón de la Abuela (artisan chocolate makers).
The initial investment recovered quickly and demand grew to the point that they had to rent a larger space.
What can we see through the eyes of accounting? In principle, that the initial investment is a cash outflow, not an expense, because at the accounting level you will see that an amount comes out, but it will come back to you, because after all it is an investment, that is why the sale of these goods became the first income.
Consider cash flow in an infographic
Another example? Go…
This company is called Geosam. A geological project consultant from those who conduct soil surveys etc.
Geosama’s cash flow would look something like this:
How do I register my accounting accounts easily?
Bookkeeping requires organization, as the accounts must be recorded chronologically and continuously. For this reason, many prefer to hire an accountant to perform these procedures.
But you look for the accountant and he addresses you with incomprehensible expressions and you remain the same. What a mess!
Nothing you can’t solve yourself… just the way you read it!
Do it yourself with management software
There is currently management software that carries out all booking processes automatically. Most of them with monthly payment, but they also have a free version to help you choose which is more intuitive, easier and more customizable to your business.
I can name a few of them: Contasimple, OneBizz, Contamoney Accounting-easy by Platzilla.
They all ask you for basic information you put in the boxes (e.g. invoices) and then take care of putting everything in place and giving you accounting reports.
And since the information is stored in the cloud, you can register and consult it from anywhere in the world and at any time.
If you ask me which one is better, I’ll tell you without thinking: Platzilla’s Accounting-easy, because it performs the basic operations of accounting and billing, but later you have the possibility to integrate other applications of the premium pack so that your business is growing. For example: CRM, quality, maintenance, human resources and additional technical support as often as you need it.
What happens to the rest of the software like Contasimple, OneBizz or Contamoney that later you have to waste time and money on integrations with other applications and Platzilla with a small increase in the package or with the purchase of the premium have everything integrated.
We are nearly finished. Now comes the duties.
What are the tax obligations?
It all depends on the activity you declared to the tax authority. The Treasury requires you to file taxes, which are generally two: sales tax and personal income tax. Both are presented quarterly and annually.
Where do you reflect these taxes? So with the billing. When you invoice, then you declare the taxes and most importantly, you pay them.
What is constability? It is your friend and ally in financial decisions. So buy the software and play!
Would you like to read articles on this topic? Here is a good selection:
In search of the lost euro
How do I issue an invoice as a self-employed person?
How can you manage your time efficiently?
How does an innovative organizational culture emerge?