Week 10 Reading reflection

Oh gosh, financing is so complex. I never had imagined I would learn all these stuff. So for our Week 11 reading we had to read... Financial preparation is crucial for a business's life. If you don't finance your expenses and don't know how to manage money within your budget then you'll lose lots of mind and the venture will die. Because of this, planning is an important asset an entrepreneur can have.

To keep track of your expenses you have the balance sheet. Assets are the financial resources of the firm and liabilities are the claims that creditors have against the company.The residual interest of the firm's owners is called the owner's equity. All of these are included in the balance sheet.

One of the points made in a text in the book is the problem of uncollected or very delayed receivables. This means when you offer credit to your customers but they choose not to pay off that credit in a timely manner. This shows disrespect to the company's economic standing, because these type customers take advantage of their credit, but they don't know what kind of damage they do to the company's economy. The company is serving you to pay him, not to purchase things "for free" when they are not supposed to be.

That's why starting entrepreneurs should find a funding resource in case they fall into the trap of mismanaging their finances. In addition to that they should reflect on their customers activities and if they have been responsible towards the firm so that they can decide on whether they are worth on investing any more or not. You don't want to get a loan that will keep increasing when you don't have legitimate resource to invest in or have taxes payable. I would highly encourage as the writer states to offer discounts for early payment. This way you encourage people to pay you more often and sooner. This solves pretty much the problem and the customer is satisfies, too.

Finally, there is one thing I don't understand but I know it helps a lot for the entrepreneur's debt. This is the accumulated depreciation. Accumulated depreciation for either a building or equipment is the amount that is written off the book due to wear and tear. Is this feature used when you want to disregard the assets that cannot be used anymore? In the text, it is stated that this accumulated depreciation helps lower the tax liability. I don't quite understand the process till that effect.