Intro
Hey NexGeners! Let’s talk about the managing aspect of business! While start-up companies tend to be focused on establishing the business rather than expanding, financial terms are still critical to understand.
Finance is a combination of the cash flow and investments of money within a company. Meanwhile, accounting is the recording of a businesses assets and liabilities.
Here’s a list of things that most businesses need money for:
The first point is one that is important even if you do not want go into finance. When a bank covers a transaction that is below the minimum amount required to be in the account at an extra cost. This is called a Bank Overdraft.
For example: Tommy gives a check to Marconi of $150. But Tommy’s bank account now only holds $50 because he didn’t account for all the monthly charges on his Netflix and Hulu account. The Bank covers the missing $100 Tommy owes to Marconi that is not in Tommy’s account. However, Tommy is required to pay back the $100 plus an “overdraft” charge for going over what the required minimum was for that account.
Factoring: When a company gives their accounting receivables to a third party which immediately pays the majority percentage of what was owed from the accounting receivables. This results in that other company getting back most of its dues immediately and the third party gettting to keep a percentage of what was owed to the company.
So.. What does that mean? Let’s try an example.
Tiny Tim breaks his arm while he anticlimactically fell down the stairs. Now he owes the hospital money. But, the hospital kind of wants its money back now. So behind the scenes, the hospital sells its creditor rights over its account receivable for Tim (or what Tim owes) to a third party (a factoring company). The third party immediately pays back the hospital a large percentage of (let’s say 80%) what money was actually due by Tim to the hospital, then waits to collect Tim’s debts due. Tim then pays back the money he owed in full to the third party. The third party therefore has a 20% profit from their loan and the hospital gets most of it’s money back in a short period of time.
Crowdfunding: When the populace funds a project.
Ex: An online example is kick-starter.
Micro-finance: Banks that focuses on lower income families and lending to smaller businesses.
Share issues: The shares provided by a company that are sold within or outside the company (in stocks).
Bank Loan: Loans from a bank
Debenture: A long term loan taken with no collateral (they're also called bonds).
Long-term loan: Loans paid after ten years or more.
Grants: some of money given by an organization or government that does not need to be to paid back monetarily. Often comes with strings.
Hire Purchase: buying via payment installments rather than in full
Leasing: like a long-term rent.
Medium-term Loan: a loan that lasts 5 to 10 years.
Example: Bob want to buy a new facility for his company, so he takes a medium term loan. Best to take depreciation of what is being bought from the loan in consideration.
Depreciation: The accounting cost of all tangible asset, while considering for its productivity over its lifespan. For example, a car depreciates in value as time goes on, making it less valuable than the original market price.
Finance is a combination of the cash flow and investments of money within a company. Meanwhile, accounting is the recording of a businesses assets and liabilities.
Here’s a list of things that most businesses need money for:
- Maintenance expenses
- Office Equipment
- Rent cost
- Machinery
- Payroll expense, (ex: salary, commission, time-based + potential benefits).
- Insurance
- Products
- Utilities: such as form, place, & product
- Marketing budget
The first point is one that is important even if you do not want go into finance. When a bank covers a transaction that is below the minimum amount required to be in the account at an extra cost. This is called a Bank Overdraft.
For example: Tommy gives a check to Marconi of $150. But Tommy’s bank account now only holds $50 because he didn’t account for all the monthly charges on his Netflix and Hulu account. The Bank covers the missing $100 Tommy owes to Marconi that is not in Tommy’s account. However, Tommy is required to pay back the $100 plus an “overdraft” charge for going over what the required minimum was for that account.
Factoring: When a company gives their accounting receivables to a third party which immediately pays the majority percentage of what was owed from the accounting receivables. This results in that other company getting back most of its dues immediately and the third party gettting to keep a percentage of what was owed to the company.
So.. What does that mean? Let’s try an example.
Tiny Tim breaks his arm while he anticlimactically fell down the stairs. Now he owes the hospital money. But, the hospital kind of wants its money back now. So behind the scenes, the hospital sells its creditor rights over its account receivable for Tim (or what Tim owes) to a third party (a factoring company). The third party immediately pays back the hospital a large percentage of (let’s say 80%) what money was actually due by Tim to the hospital, then waits to collect Tim’s debts due. Tim then pays back the money he owed in full to the third party. The third party therefore has a 20% profit from their loan and the hospital gets most of it’s money back in a short period of time.
Crowdfunding: When the populace funds a project.
Ex: An online example is kick-starter.
Micro-finance: Banks that focuses on lower income families and lending to smaller businesses.
Share issues: The shares provided by a company that are sold within or outside the company (in stocks).
Bank Loan: Loans from a bank
Debenture: A long term loan taken with no collateral (they're also called bonds).
- City government issues debentures at the park.
Long-term loan: Loans paid after ten years or more.
Grants: some of money given by an organization or government that does not need to be to paid back monetarily. Often comes with strings.
Hire Purchase: buying via payment installments rather than in full
Leasing: like a long-term rent.
Medium-term Loan: a loan that lasts 5 to 10 years.
Example: Bob want to buy a new facility for his company, so he takes a medium term loan. Best to take depreciation of what is being bought from the loan in consideration.
Depreciation: The accounting cost of all tangible asset, while considering for its productivity over its lifespan. For example, a car depreciates in value as time goes on, making it less valuable than the original market price.
Google's Gems
|
Here are some lesser known (and mostly complimentary) features that Google provides that can be hidden gems for launching or expanding your company.
Google Wallet: online money source for e-commerce transactions
Google Wallet: online money source for e-commerce transactions
- Actual link: https://www.google.com/wallet/
- Youtube explanation link: https://www.youtube.com/watch?v=LnmjINN9Z1A
- Actual Link: https://www.google.com/adsense
- Youtube explanation link: https://youtu.be/EfahvPukyEI
- Actual Link: http://docs.google.com/forms
- Youtube explanation link: https://youtu.be/wwf72lwPLVY
- Actual Link: https://trends.google.com/trends/
- Youtube explanation link: https://youtu.be/4uNrhACTv_c
Accounting Assets and Liabilities
To build up your dream organization sky-high, you will want more knowledge over the accounting side of your company. We highly recommend the use of online accounting services, such as Quickbooks for starting off. Furthermore, passing a Quickbooks Certifications Test will provide all the necessary accounting basics necessary to record our business financial transactions. To test the quality of the service, I got QuickBooks certified myself and found it as to be incredibly beneficial!
Try managing your business transactions at:
www.quickbooks.com
Try developing your business accounting skills at:
https://search2.quickbooks.com/
Try managing your business transactions at:
www.quickbooks.com
Try developing your business accounting skills at:
https://search2.quickbooks.com/
Chains of Production
In order to understand how one will produce one’s product, it is useful to review the main methods of production. Note your future/current business might use more than one for these methods. This is just dependent on the objectives of your business. Understand the process in which your products are produced and additional alternatives is imperative to the growth of your company. Here are the main four:
- Job Production: Production methods that involve producing are highly customized or tailor-made products for each customer. The product tend to be designed to fit each customer’s needs. Advantage include the uniqueness and originality of the product. Disadvantages include that its tends to be more expensive due it being created by higher specialists. Also, it may take more time for the customer to receive the full product. Examples include designer dresses, expensive jewelry, or expensive cakes at bakeries.
- Batch Production: The continuous movement of items from segregated workstations stages to form a product. For example, Standard Oil refined it product by passing their crude or shale oil (a form utility) in different stages to make the product usable and accessible to the customer. This production is also demonstrated by paint companies.
- Flow Production: This involves the assembly items being passed down in a continuous, sequential process until is assembled into the whole product. This tends to related to mass marketed product. Work that requires an assembly line, such as Henry Ford’s Model-T car is an example.
- Mass Customization: The production of a production that provides a few preset customizable options for consumer. An advantage of this is that there tends to be a lower unit cost compared to customizing the product entirely. Examples include Dell’s computers & the customizable widgets on provided Samsung phones.