As an entrepreneur, you may already be adept at marketing strategies and branding that attract customers. However, do you know that mastering financial recording is equally important? While cash flow, capital, and balance sheets might sound unfamiliar if you’re focused on other areas, don’t worry! Learning basic accounting is not as complicated as it seems.
Allah ﷻ also commands us to record our financial activities, as this command is clearly stated in the Quran:
يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوٓا۟ إِذَا تَدَايَنتُم بِدَيْنٍ إِلَىٰٓ أَجَلٍ مُّسَمًّى فَٱكْتُبُوهُ ۚ وَلْيَكْتُب بَّيْنَكُمْ كَاتِبٌۢ بِٱلْعَدْل
“O you who have believed, when you contract a debt for a specified term, write it down. And let a scribe write it between you in justice…” (QS: Al-Baqarah: 282).
With a fundamental understanding of financial statements, you can:
- Make Better Business Decisions: Accurate financial data helps you see the overall financial health of your business.
- Improve Efficiency and Profitability: Learn to manage cash flow effectively, maximise capital, and optimize the balance sheet to increase profits.
- Attract Investors and Boost Confidence: Neat and transparent financial statements build your business’s credibility in the eyes of investors and partners.
Let’s explore simple steps for financial recording in this article. You will be guided to understand cash flow statements, capital, and balance sheets, and how to apply them in your business financial reports.
Also Read: Sharia-compliant Entrepreneurship Concept
1. Expense Records
In the early stages of your business, it is crucial to have detailed records of all expense items. This includes the purchase of raw materials, shipping costs, packaging costs, and labor costs. With these records, you can know exactly how much capital has been or will be spent during the month. This information is essential for determining the sales targets needed to cover the capital and calculating how many products need to be sold to achieve the desired profit.
2. Income Records
Income recording aims to monitor sales results and identify which products are most and least popular. With this information, you can make strategic decisions regarding the use of capital, such as which products to increase production of and which to reduce.
3. Main Cash Book & Profit and Loss Statement
The main cash book combines information from expense and income records, allowing you to know exactly whether your business is making a profit or experiencing a loss. This profit and loss statement will facilitate strategic decision-making for future business development.
4. Stock and Inventory Records
This record aims to help business owners know what items they currently have, which ones are selling fast, and provide alerts when stock is running low. This way, reorders can be made more quickly, and you can avoid stockouts, ensuring that customers can always find the products they are looking for.
Why Financial Recording is Important?
Better Business Decisions: With proper financial recording, you can see spending and income patterns, helping you make smarter and more strategic decisions. For instance, knowing peak sales periods can help you plan promotions and stock more effectively.
Better Efficiency and Profitability: Managing cash flow is key to keeping your business running smoothly. You can ensure there is enough money to cover operational expenses and also leverage capital for investment opportunities that can increase profits.
Boosting Business Credibility: Investors and business partners will have more confidence in a business that has neat and transparent financial records. It shows that you are serious about managing your business and gives them the confidence to invest or collaborate with you.
In conclusion, to start simple financial recording for your business, first, choose the right tools by selecting accounting applications or software tailored to your business needs. There are numerous user-friendly optio/ns specifically designed for small businesses. Next, clearly define and separate expense and income categories to facilitate easier analysis. Ensure every transaction is recorded without exception, as discipline in recording every transaction will give you an accurate picture of your business finances. Periodically review and analyze your financial records to identify trends and make necessary adjustments. By following these steps, Insha Allah you can keep your business finances well-monitored and make informed decisions for the future.
Also Read: What Can We Learn From Prophet Muhammad ﷺ’s Success as An Entrepreneur?
References
Alumni Sakinah Finance. (n.d.). Perencanaan Keuangan Syariah Untuk Semua. Tazkia Press.
Otoritas Jasa Keuangan. (n.d.). PENGUSAHA UMKM JUGA PERLU PENGELOLAAN KEUANGAN LOH!. Sikapiuangmu. Retrieved from https://sikapiuangmu.ojk.go.id
TafsirWeb. (n.d.). Surat Al-Baqarah Ayat 282: Arab, Latin, Terjemah dan Tafsir. Retrieved from https://tafsirweb.com/1048-surat-al-baqarah-ayat-282.html