Andrea Klassen
Financial Reporting

Seeing my dad working 110% and putting everything that he had into the business to provide for the family, was the reason why, in Grade 11, I actually took business management as an additional subject. I saw my parents with their businesses, and it pained me to see that they were not fully understanding the finance side of the business in the small mistakes that they were making.

The first thing that I would look for in a business' books is the cash flow. Because the cash flow is broken down into three parts: the operations, the financing side and the investing side. This is how you can decipher where this entrepreneur or business is spending money.

Financial reporting is basically documenting the transactions that you are doing with your money in the business. You're doing this so that you can make decisions to either grow, save or invest money in a path that you feel is going to increase success in your business, such as a new product.

Three fundamental reports - income statement, balance sheet and cash flow -  give you a snapshot or an understanding of where you can save costs, how you can manage your debt and if you can pay your creditors on time, as well as your cash flow position.

Forecasting is using historical data to make estimates about future projects. If, for example, you have set out to launch a new product, it is extremely important to forecast so that you know what costs to consider and what your sales targets need to be, so that you can drive your business in a direction to meet those targets.

As you are starting out, the first thing that you have to ensure is that your records are up to date. Make sure that your invoices are filed, and your bank statements are reconciled - that’s understanding the opening balance and the closing balance of your bank account.

Separating your finances is especially important when it comes to SARS. If you haven't accounted for the taxes that you're going to pay at the end of the year, you're going to think that you have a lot of money at the beginning of the year. Come the end of the year or the tax-filing period, when you need to pay SARS, you realise you don't have enough money because you used the money to pay school fees or buy groceries.

When you receive money, ensure that you have a budget, ensure that you forecast your costs and the sales that you're going to make so that you manage the financing well.

SARS looks at your documents to determine if your claim is a valid business transaction. That is essentially why you should keep your till slip and your invoices - it’s for SARS to verify that the transaction that you're claiming for your business is valid and accurate and then they will allow you a deduction for your business. 

The break-even analysis is essentially calculating how much sales you need to make to see a profit. It tells you if you are breaking even in the sense that you are making enough sales just to cover your fixed costs, just to survive, and how much sales you need to make in order to make a profit. With this information you can drive your sales targets for the numbers that you want to achieve.