It is necessary for every businessman, and I would say, that it is essential to know the financial compartment of his company, as a way of having the bases to be able to make adjustments or corrections to achieve the goals that he has financially proposed or correct once and for all. all the mistakes that it has been making in its management and that can seriously jeopardize the stability and future of the company.
In my activity as a consultant to microentrepreneurs, I take daily surprises with the content of the Financial Statements and the reality of the company. Some microentrepreneurs have the desire to "know" that their business is prosperous and that it has a great future, and apparently, that is what their Financial Statements reflect, duly made up with figures that do not correspond to reality, but that have a double purpose "to deceive oneself" and to deceive suppliers, financial institutions and "others" who have the purpose of doing a business with them, opening a credit quota or giving them the confidence to start operations.
Financial analysis is a tool that allows us to know the state of business in various ways, relying on the "real" content of the basic Financial Statements: the General Balance Sheet, the Income Statement and the Cash Flow.
With the information provided by the Balance Sheet, assets are analyzed (disposition of money and material goods). With the Income Statement, an attempt is made to arrive at the net benefits obtained in a certain operation, analyzing the income, costs and expenses generated in it, and with the Cash Flow the projected income and cash outflows and to know its state of solvency or deficit of available money.
This tool allows us to arrive at results using different techniques, such as the Analysis of integral percentages, comparing the accounts that are part of the Financial Statements, Projecting and analyzing trends to future years, Knowing and analyzing the variations given in different years of comparative way or apply Financial Ratios to measure behaviors on Liquidity, Indebtedness or Solvency, Profitability or some other ratios that allow us to verify the quality of the management that has been operated in the company.
Based on real information, we can then prepare Budgets, forecasting sales, collection of portfolio for credit sales, expenses and costs, with the purpose of establishing objectives, determining necessary resources and designing strategies that allow us to achieve the goals designed in growth of the company.
If we start from the basis that the information provided by the Financial Statements does not conform to reality, the results will be just as "false" as the same basic information and in fact they will turn out to be a self-deception, without sense and without reason.
The meaning of Accounting is to record the events that occur daily in a company with the clear objective of making a numerical history of each of these events, making known the state of health of the company in its financial aspect, and of support in decision-making to adjust or correct mistakes, in addition to allowing us to exercise the controls that are necessary to be able to maintain the direction of the company in its best horizon.
If you are not realistic with the record of the events of the company, what future awaits the same, if there is no basis to correct, what has not happened?
