Starting a company does not require much knowledge in the area of finance, you just need to have clear ideas, a good organization and good financial tools that contribute to the economic process. All companies, whether large or small, can achieve excellent business management, obtaining great results.
To keep the accounting order of the company it is not necessary to have a large staff, to have great capacities, what is necessary is to have financial tools that streamline the accounting area. Accounting is a mandatory requirement for all companies, it also provides valuable information for the administrative and financial level for them.
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In this article you will find:
What are the financial tools?
There are fundamental tools for the accounting development of companies, these tools are essential to obtain financial information and know the current situation of the company. The main tools are:
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Balance sheet
This is an accounting document that attaches the current information of the companies. This has the status of assets and liabilities. The balance sheet compiles all the resources and assets, the obligations and commitments, the rights and the capital that the company has as a base.
This document is not used to know how the evolution of the company has been, but to know all the important data in a certain time. This has great relevance in the annual paperwork of the company, since it must be presented at the end of the accounting year.
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Financing cost
This document expresses the interest rate of a loan or type of discount that investors need. The cost of financing varies according to your need, when it is about a share issue, it is would focus on the relationship of the contribution made by the new investor and how the utilities. When it is a bond issue, the cost of financing would be the placement rate of the instruments.
It also expresses the additional costs, such as taxes, legal procedures and the payment of professional services, company openings in the event that it is attached to a stock exchange.
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Statement of cash flows
Generating cash is one of the missions of companies, since with this they can accelerate all their processes, invest in the growth and future of the company and comply with all the obligations that this has. When we talk about cash flow we refer to the movements of money generated by the company.
Companies generate cash flow through collections from customers, that is, the sales of the products or services that it offers, through the sale of assets which are the resources that generate a good for the company, and finally we can find the capital contributions of the different partners.
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The cash flow statement is the basic state of the company's finances, it is reflected in it the different movements and variations of cash that it has in a certain period of time. It reflects the figures of money that have been generated through business operations such as investments, collections and financing. The purpose of this document is to make known the amount of money that has entered the company and also that which has been spent through the different daily operations of the company.
Profit and loss account
This is an accounting document that reflects the profit and loss accounts that the company had during the accounting year. This reflects the real figure of the total profits of the company, where with an analysis it is studied where these resources have come from.
This reflects the risks of possible expenses or losses and which are the increases that benefit the company the most. The earnings are reflected in the credit account and the expenses in the debit. This document is one of the most requested and the most important for the company when the accounting period ends.
Working capital
The working capital is the tool that the company has to continue with all its development processes and financial activities. This is part of the current assets that has been financed by a permanent asset.
The control of the working capital is of great importance because part of the liquidity, sustainability and solvency that the company has in a short period of time depends on it. The fund varies according to the period of the year depending on the activities of the company.
Financial indicators
This is made up of various tools, which use certain data and internal information of the company in order to know what is the capacity that it has to generate income and expenses, in addition to the stability that it has in reference to its life economical.
You can count on liquidity indicators which measure the ability of the company to generate money and pay off its debts. The indebtedness indicator studies the company's ability to borrow. The profitability indicator measures how the company does to stay firm over time and the efficiency indicator studies how the company makes use of all its resources.
Importance of financial tools
These tools have great relevance in the life of all companies, since with them certain services can be improved, as well as increasing their production depending on the profits reported in the documents, it also allows to know essential data for decision-making, which with them can ensure a more sustainable future for the business.
We must give the importance they deserve to all the financial tools mentioned and all the existing ones, since they facilitate business life. These tools organize the existing information.
The financial tools in an appropriate way regardless of the company, whether it is medium, large or small. With the proper use of these, the partners will be able to count on a stable, prosperous and developed company. Nowadays, virtual tools are known that also have many advantages to offer to entrepreneurs, this being a simpler and more practical way for everyone.
