Chances are you’ve ever wondered: Are finances for me? Why should I know them? One answer would be that without exception all human beings, every day of our lives, we make decisions that affect our pocket.
Currently, a large majority of people think that it is not necessary to have basic knowledge in finance , for that, they can hire a specialist so that they can solve their concerns, the reality is that this is a wrong assessment, since all People need to understand the financial bases, both personal and those of an organization.
The company as such is a dynamic organism that moves and advances according to how it is managed , that is, how decisions are made.
All entrepreneurs and entrepreneurs must understand what financials communicate to them through their financial statements and know how to use their content to make sound decisions and based on that, have the opportunity to give continuity to their business in the first place and subsequently achieve their increase.
At this moment, it is not enough to only worry about producing, selling and growing without having well-managed finances , since we can put at risk the permanence of the company whatever its size.
Accounting is the fundamental basis for the generation of financial information, it will allow us to:
The central issues that both the financial information processor and the top management of the organization must know are:
- How to manage working capital (accounts receivable, inventories and accounts payable), since it results in the organization’s liquidity. For any organization the central issue is the effective management of money , because that is where the importance of finance lies, since without this resource the probability of closing the business is almost guaranteed.
- The proper administration of working capital allows two fundamental aspects related to decision making. The first, at the optimal level of investment in current assets, that is, not exceed the cash required, or the lack of liquidity. The second refers to the appropriate mix of short and long-term financing for greater profitability of the organization.
- The bases of how to prepare a budget, analyze and interpret the financial information that your financial statements give you in order to base your decisions on it.
- Knowing the fundamental concepts of finance, will allow you to evaluate the viability of investment projects to know the profitability of these, as well as knowing how much they cost their funding sources.
Based on the information available, the entrepreneur will be able to visualize where his company will go , which is why he needs a lot of attention, although he must rely on an expert in the generation of this information , this does not exempt him from knowing these concepts that will serve to speak the same language with potential investors, your accountant, financial institutions for obtaining credits, authorities, among others.
As Peter Drucker points out: “long-term planning does not deal with future decisions, but with the future with current decisions”, that is, what you decide today will be a reflection of what you will live in the future.