A guide to financial accounting for emerging companies

Financial Accounting
Do you have difficulty dealing with accounting? Feel as if it is a complex mathematical language that you cannot understand? In this guide, you will easily learn about the most important steps and necessary foundations for you as an emerging company to remain in the field of competition, anticipate events and pass over financial crises with high professionalism.

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Many entrepreneurs and small and medium enterprise executives have concluded that accounting is not urgent.

It is a financial process that can be addressed later, focusing on marketing, investor search and how to develop new products. 

The previous procedures are good in substance, but how are you going to measure your financial progress and how close or beyond your marketing goal without standing on the threshold of your financial numbers and understanding them well? How do you know when you’re going to need new staff? Then, more importantly, how do you deal with the global economic pandemic that is currently ravaging companies? 

Those who think that accounting is a secondary act, forgetting that it is the main pillar in the success of any business activity, fancy it.

In this article, we will present to you the most important and successful accounting methods that you need to apply to your emerging company.

What is successful financial accounting in an emerging company environment?

As an entrepreneur or executive director, you shouldn’t move in the business world according to personal assumptions or adopt a simple notebook to restrict your finances.

You must build a real system against which to measure actual expenses, including your operating expenses, wages and salaries, income-generating assets, and net profit, so that you can objectively assess the progress of your business.

Mostly, you’re the only link to your clients, and most of your time is spent doing the following tasks: 

  • Building a financial system to manage the accounting process in your company, whether you use paper and pen or software, such as: Microsoft Excel or Google Sheets.
  • Create invoices and send them to clients.
  • Follow-up of the invoices to determine their status: whether or not they have been paid? Why? 
  • Make sure to balance your cash flow with your expenses.
  • Prepare your tax liabilities and your tax declaration on time.

Emerging companies are pressed in every sense of the word and their only strength is their high flexibility and speed in carrying out their business.

Therefore, you do not need any accounting errors that may bring you to the brink of failure, especially since most companies do not last five years.

There is no specific mechanism for carrying out previous tasks in the business environment, especially in emerging firms. 

someone is making Excel’s files their accounting software and entering the required data manually on an almost daily basis. 

A cloud accounting program is used to provide easy and fast statistics and information.

 Try to hire an accountant or use cloud accounting software.

By the way, Qoyod is a cloud accounting program that doesn’t need to be downloaded and provides you with everything you need to automate your company’s accounting process. 

Try it now for free for 14 days to see for yourself its effectiveness and power.

How to budget for your emerging company?

Accountability and randomness never go together, they are the real antithesis.

Companies that do not have a budget that limits their expenditures, cash flow, operating expenses, and net profit will suffer greatly. 

A budget is a financial tool that helps in making effective financial decisions by reading a company’s financial record and comparing its financial performance monthly or quarterly.

Because the basic information is written in a practical system (e.g. Qoyod), it is allowed to compare numbers for analysis and reading by the executive director or in collaboration with a professional accountant.

To set an effective budget for your company, include the following information in your budget file:

  • Revenue: The amount of money that comes into the bank account of your company on a monthly basis from the sale of your services or products.
  • Expenses: They are all that you spend to run your project and can be summarized in two main categories:

Your fixed expenses (staff wages, office, website) that you pay monthly and flexible expenses, are variable expenses that you may not pay monthly but are paid from time to time, such as: the cost of developing a new product or renewing the visual identity.

  • Your profits: a simple calculation formula that subtracts expenses from revenue to determine your net profit. This function can be performed annually or even monthly to determine the size and proportion of your profits. 

Past data is the cornerstone of preparing your financial budget.

Your budget will grow over time with the development of your company, but the previous information is sufficient in the beginning to correct your financial situation and stand on accurate financial figures.

Using financial statements to evaluate business performance

The financial statements that enable you to assess your company’s performance are meant to show your cash flow. 

And it’s the process of calculating the amounts in and out of your company, to really know if your company can afford it or stay on the market.

Unfortunately, small and medium-sized enterprises have difficulty knowing their cash flow for a number of reasons, including:

  • Many entrepreneurs are unaware of the importance of recording invoices and entries on time and organizing them into an elegant file to facilitate their analysis and review.
  • They suffer from severe weakness in inventory management due to the use of more than one file or paper, the process of knowing the goods in stock and arranging them in terms of the best-selling and least-selling goods, pushes entrepreneurs to randomness in marketing, which reflects negatively on them.
  • They do not invest in an accounting cloud program that frees them from previous problems, almost all entrepreneurs view accounting as a simple act that is no more than knowing revenues and expenses, but this is not true, accounting is a deep process that first needs a professional accountant.

The turmoil that hangs over emerging companies from time to time is due to poor financial management, so they become severely paralyzed and do not know how to recover from it to prepare well.

In order not to fall into this trap, make sure to manage your cash flow and adjust it with high intensity.

How to create a financial forecast?

If I ask you, do you need an investment in the next six months? Can you respond accurately and decisively to the previous question? 

Maybe you didn’t think of the previous question, which is about the business of start-ups because they have no preconceptions about future financial prospects.

When we say creating future financial expectations, we ask you not to seek an unfair investor but to address problems and crises before they occur.

There is no eternal customer, it is normal that after a certain period based on your own numbers, your customer withdraws from using your company.

Maybe it’s because he’s found a better solution or satisfied his desires and no longer needs more.

The point here is to plan your future revenues and expenses so that you can paint a clear future picture.

So change your business plan in time or look for an investor to support your cash flow.

The idea here is to always try to monitor your future numbers to know how to plan well.

For example, if getting an investor is difficult, you can use an alternative plan such as reducing your expenses so that you can avoid sudden crises.

Of course, your future can’t be predicted without monitoring it beforehand, so make sure to paint a clear picture of your financial future every 6 months.

The importance of making a financial inventory

Like any profit-seeking business, you have often begun to prepare for the national day if you are mainly active in the Saudi market or Black Friday if you work on an international scale.

I see you shaking your head confused, and your mouth: What does this have to do with the financial inventory?

The financial inventory is intended to track your inventory, identify all the products in it and then rank them from top to lowest selling.

It is therefore a clear picture of what needs to be emphasized.

However, inventory management is complex, especially since inventory contains thousands of products.

It is therefore essential to invest in a dynamic and high-quality inventory management program in order to know the amount of money in your inventory and to predict your financial income, which is the definition of financial inventory.

The smart methodology for managing your inventory and making an accurate financial inventory is with the help of cloud accounting software such as Qoyod.

Here’s what Qoyod has to offer:

  • Add multiple stores: You don’t have to use one branch, but you can use more than one branch or location for your inventory, upload products to it, and create purchase invoices.
  • Inventory control: Helps you adjust the increase in the quantity of your products and manage damaged and recovered products so that you act wisely.
  • Inventory transfers: Flexibly move your products from one location to another by selecting the products to migrate and the branch you will reach in.
  • Comprehensive reports: Here comes the effectiveness of the tight financial inventory through the product locations report, which helps you know the quantities available at each location to help you coordinate the distribution process.

As well as a summary report of sales, purchases and stored products to know the purchases and sales of each product in addition to the net profit and total cost of each product. Try Qoyod now for 14 days for free!

The importance of monitoring high-cost expenses

A looming risk is the lack of control over high-cost expenses.

These expenses that we leave unattended are gradually growing into a serious problem.

An example of high costs is hiring a huge number of workers and paying them lucrative salaries.

While it is best to hire them by the hour rather than hiring them full-time or part-time in your company.

Also, the stagnation of inventory is one of the highest expenses due to the difficulty of getting it out, and therefore the company bears the consequences of its recession.

The only way to escape the specter of high expenses is to keep track of and monitor your financial budget accurately.

Perhaps the best solution is to hire a specialized accountant – we’ll talk about how to hire an accountant later – who has his own techniques in analyzing and reading financial figures to offer you the most effective combination to eliminate those expenses forever.

If your budget does not allow you to hire an accountant, we recommend that you invest in a cloud accounting program at an affordable price until conditions are moderate and you are able to hire an accountant.

Try Qoyod – a cloud accounting software that doesn’t need to be downloaded – now for 14 days for free.

The importance of monitoring the company’s financial flow

Statistics say that 82% of small and medium enterprises go bankrupt and close their doors in their early years due to poor cash flow management.

Monitoring your cash flow far outweighs profit collection because you control it somewhat.

Cash is how much money you have in your bank account.

It helps you prepare for crises, as the COVID-19 pandemic has brought airlines to the bottom and demolished the tourism industry.

Although there are airlines that have not wavered due to their enormous ability to monitor their financial flow, they also enable you to seize investment opportunities.

To monitor your cash flow professionally and profitably, do the following:

  • Save a portion of your company’s income: Don’t fall into the trap that saving is the worst way in the financial world, it’s a friendly friend of investment and without it you’ll always run in the loan race.
  • Be sure to save a specific part of your company’s profits and do not touch it unless absolutely necessary. 
  • Carefully weigh your expenses and income: Don’t let your expenses increase as your income increases, but be wise about your expenses.
  • Try to reduce secondary expenses that do not provide any real value to your business and save the rest as it is the only way to save your cash.
  • Reading the future wrong: Unfortunately, many entrepreneurs spend their current cash according to future expectations that may or may not happen.

Don’t cash out your cash on the basis of an illusionary expectation.

Read the future carefully, but do not spend all your liquidity on delusional expectations; insteadallocate a reasonable budget for it if your prediction succeeds, you gain and if it fails, you remain coherent because you did not strain your cash flow.

In an era full of pandemics and storms, don’t take assumptions or expectations as the basis for driving your financial decisions.

Be firm about your liquidity in order to stay competitive for as long as possible.

The importance and conditions of appointing a professional accountant in the company:

Unfortunately, many Arab entrepreneurs view the first window of growth: accountability, as an activity that does not belong to them.

There are even those who assert that they can take over accounting tasks themselves, as they are just simple mathematical equations.

But this perception is completely wrong, accounting is a huge, branched and complex science and teaching it at the university is not crazy because it is important and effective – not only for companies – but even for governments themselves.

As a smart entrepreneur active in an increasingly competitive market, you should hire an accountant as soon as possible.

Steve Jobs says, “We don’t hire smart people to tell them what to do. But to tell us what to do.”

This is exactly what an accountant will do for your business, provide you with important financial information about your revenue, costs and net profit to know how to make effective decisions that will propel you to growth.

At Qoyod, we understand the difficulty of finding the right accountant for you and your business.

Therefore, we have facilitated this process for you through the service of hiring the most suitable accountant for you through us, learn about the service here.

The role of cloud accounting programs in facilitating accounting work

The huge breakthrough in technology has facilitated many basic life tasks in the life of any entrepreneur, most notably accounting.

Cloud accounting software has emerged that automate many complex accounting tasks.

Instead of using paper ledgers and records, accounting software helps you accurately and easily record your financial information in a cloud system that can be accessed at any time.

The primary role of cloud accounting software is to keep and organize all financial records on a daily, weekly, and monthly basis.

As well as facilitating access to it whenever you need it without the need to download the program on your device or phone, but you can get information from it whenever you want.

It helps manage your income, expenses, inventory, purchases and salaries, sales, bills, income, and financial obligations.

This is in addition to comprehensive financial and accounting reports to help you understand your financial situation in order to make effective financial decisions.

Qoyod is one of the best cloud accounting software program in Saudi Arabia.

It is an easy-to-use cloud accounting system.

The advantage of Qoyod is that it helps you raise the efficiency and sustainability of your company and reduce your risks because it gives you a complete picture of your financial situation.

Try Qoyod now for free for 14 days.

The conclusion

We agree that accounting is the cornerstone of any business activity, especially for emerging companies, as it is their backbone.

As a Small or medium enterprise, the previous information we discussed in this article is more than enough for you to start building a suitable accounting system for your business.

A company that thinks it can do without accounting is delusional and will discover the extent of the damage it is doing to itself later.

Plan well for your financial budget, and make your financial statements fuel your decisions, not assumptions and randomness.

Study your financial situation constantly to paint a picture of the future of your financial outlook.

And do not forget about the importance of financial inventory and the need to reduce high expenses.

Then, if you have a budget, hire a professional accountant to take charge of this process and make your accountant’s job easier by investing in cloud accounting software.

Try Qoyod now for free for 14 days.

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