Weekly Theme 25: Keeping a record of your finances

Balancing coinsNow that you have finished planning your business, the next stage is launching and running it! When running a business it is very important to keep a record of the cash flow – this is all of the money moving around the business. This will help to make sure that you are always in control of your money.

But first of all we must ask ourselves the question – why is this important?

1) To make sure your business is profitable

For a business to be successful it must be profitablethis means more money is coming in than going out. This is why every business must record everything that it is spending (the costs) and everything that it is selling (the income).Screen shot 2013-10-02 at 11.42.00The money going in to a business is called revenue. If the business is not profitable, the revenue must be increased or the costs must be reduced. If both of those things can be done – that’s even better!

2) To identify problems

When starting to run a business it is important to regularly compare the cash flow to the financial plan that you made. Sometimes the profit being generated is lower than it should be, or the business might even be losing money. If you have a record of your cash flow it helps you to understand why this is happening. After you understand what the problem is, you can then decide how to solve it.

If you do not have a record of your finances it can be very difficult to identify what the problems are and to know how to solve them. If your business plan and financial plan are extremely good and your business runs without any financial problems – great work! However, it is still vital to keep a record of the finances. This means you can always strive to improve your profit margin – the amount of profit you make.

3) To help you write your Final Report

The final stage of the School Enterprise Challenge is submitting your Final Report. We will shortly be providing a template for this, which will include a section on the finances of your business. If you keep a good record of your finances whilst you are running your business it will make it much easier to complete your final report! And remember – you will also have the chance to win one of our cash prizes, so the more detailed you can make it, the more chance you have!

So we know it is important to keep a record of cash flow, but how are records kept?

Screen shot 2013-10-02 at 16.27.57The finances are recorded in a table – it should look like your financial plan. The table should show the total costs, income and profit. It is very important to make it as detailed as possible. For example, if you sell food at a market the costs on your balance sheet could show that $100 was spent on fruit. You should always note exactly what it has been spent on, like this: $50 on bananas, $30 on mangos, $20 on oranges. $50 + $30 + $20 = $100.

You should record the finances as often as possible. This will help your business to grow!

Keep copiesKeep copies! It is always important to keep a copy of your finance records just in case you lose the original! If you have access to a computer and a printer then it is good to keep paper copies in a safe place. If you have access to the internet then you can even save the documents online! If you do not have a computer then it is a good idea to photocopy it or even write a copy by hand. If you don’t have time – store it in a very safe place that you will always remember!

If you have any other ideas about why it is important to keep track of your finances we would love to know, please leave a comment below!

School Enterprise Challenge Blogger,

Hamish

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About schoolenterprisechallenge

The School Enterprise Challenge is an entrepreneurship competition for schools across the world! The challenge is to create profitable, sustainable businesses as a fun way to give kids hands-on business experience, develop their teamwork and leadership skills & generate income at the same time.
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6 Responses to Weekly Theme 25: Keeping a record of your finances

  1. It is very important to keep a track of all financial records as they help us to compare our performance over a period of time and has room for analysing the factors that have led to profits or losses in the current period.

  2. Emil says:

    I appreciate your work.keep it up.

  3. Jessica Patnaik says:

    “Do you have a template that we could use to keep our records better on? If so please share.”
    Suvam Somani – Marketing Director Saioneer Exim , SAI International School , Bhubaneswar, odisha

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