The world is struggling to move forward with CoronaVirus’s global pandemic. All business persons have to focus more on their businesses. Working in an uncomfortable zone is very difficult and stressful. Due to COVID-19, all the business person has to move from their comfort zones to run their businesses or survive in the market. To run the business in this difficult time, all businesspersons should understand their skills and weaknesses. They only can develop or survive their businesses in this pandemic situation by improving their knowledge and skills.
Who is a business person?
A business person is an individual associated with the business sector. In other words, it can be stated that a business person is responsible for performing activities that are related to the generation of cash flow, revenue, and sales by the aid of various resources (Mele, Rosanas, and Fontrodona, 2017). These resources include finance, humans, brainpower, and physical capital for the purpose of enhancing economic growth and development of the business. For the success of the business, it is essential that a business person master the basic knowledge about finance and accounting (Mele et al. 2017). In other words, it can be stated that such knowledge allows the businessman to measure the growth of the company. On the other hand, accounting and finance knowledge possessed by a businessman can be used in a number of ways as the main tools to gain control over everything related to the accounting of his/her business.
What are the tasks that a business person should engage in?
A business person engages in many tasks in their capacity. He or she must able to circulate money for the purchase, selling, pay creditors, balance payroll, and attract creditors or investors. These tasks got complex and difficult due to the CoronaVirus pandemic. Not like previously, the business person should more consider about manage business continuity, business expansion, etc in this COVID situation. As businesses got affected, a business person needs to hire perfectly matching employees for the organization that can work more efficiently as the company has to manage their expenses carefully in this hard time. before moving forward, it is very important to identify tasks under accounting and finance separately to deal with this pandemic situation. In short term, Finance is where a person or an organization generates and uses money. In business, this may be borrowings, investment, lending, buying, etc. On another hand, accounting is where the process of bookkeeping, reporting, and presenting financial information to third parties. In the business context, this is related to collecting financial information, transactions, etc.
Knowledge needs to engage in business tasks
As a business person, fluent knowledge in accounting and finance is not mandatory. But, at least, you should have considerable knowledge of finance and accounting to deal with this pandemic duration. With accounting and financial knowledge, management should able to take a snapshot of the financial status of the company, especially in this COVID-19 period. A business person needs to have a brief idea about the balance sheet, profitability, statement of cash flow, income statements, invoices, payroll, and liabilities.
Also, a business person should have a brief idea about managerial and financial accounting. Financial reports are used for both internal and external purposes, but managerial reports are only used by management.
Harvard Business School, they have mentioned five skills that an entrepreneur must-have. (Harvard Business School Online, 2017). Those are more important to improve in pandemic this situation comparing to the old days.
- Cash Flow Management
In this topic, a business person should have knowledge about cash inflow and outflow. Also, they should have an idea of the current situation about revenue and expenses. In a company, cash can be called one of the critical assets. This defines the level of creditors we can have. This gives cushion to the business. With an understanding of cash flow, a company can predict the future of the company. To involve those activities, you should have an idea about finance and accounting.
- Balance sheet Maintenance
At a glance on a balance sheet, a business person should able to get a company’s financial health at a particular time such as in COVID-19 duration. This represents a snapshot of both assets and liabilities at a time.
A businessperson can able to compare assets and liabilities using a balance sheet and understand company status. If your business is a startup, it doesn’t have enough capital at the initial stage. If you have an understanding of accounting and finance, you can check the value of liabilities with respect to an increase in sales. If you are engaging in business as an investor, you can check how much the company owes versus how much the business owns before investing in those companies this year. This also gives an idea of how comfortable your business in crisis situations.
- Find a path to profitability
We can define Profitability as total cost deducted from total revenue. This can be defined in various ways. Most of the time, in the early stages of a business, profitability cannot be seen. In the early stages, the business person has to absorb the losses until entering the target market. But in long term, this is not acceptable. Therefore, they need to find a profitable business method. To achieve profitability, maybe you have to expand the current business by attracting investors. This may result in long term success.
- Communicating about money
As a business person, you should communicate about financial status properly with stakeholders such as creditors, employees, investors, etc. If you have knowledge of accounting and finance, you are able to communicate those details without any misunderstanding and miscommunications. This may apply to tax payments, invoices, purchasing orders, sales as well.
This builds the image and reputation of the company in internal and external parties.
- Planning expansions of business
Business expansion is the biggest motivation for entrepreneurs. But, before expansion, you should analyze and predict future profitability, revenue, resources need, market, and operational costs. Also, attracting new investors to the business is a mandatory task.
Without accurate predictions and planning, a business person will not able to achieve his/her goals in this pandemic situation. If you do not have the knowledge, you may be ended up in losses.
Apart from the above points, financial statement analysis is another key indicator of the businesses. The financial statement indicates how the company is doing and also it explains the financial situation of the company and it tells you the details about sales for a month or a complete accounting period, the cost of those sales, the profits that were obtained from those operations and the net profits of the company. It is essential to know exactly the result of your business if sales generate sufficient profit margins if fixed costs can be adjusted and reduced if the company is generating profits and if they can be increased (Acton, 2012).
Significant knowledge about accounting and financing allows a businessman to manage tax administration for the company. As we all know, most of the governments of different countries have taken tax reductions to boost the businesses of the respective countries. A company that complies on time and consistently with its returns and taxes is an entity that is less likely to be audited. Accounting has the necessary methodologies and systems to control even the smallest detail of any operation you want within your business. It can be the construction of a parking lot, the expansion of the warehouses, and the cost of the fleet of trucks that distributes the products to the different stores or clients.
When the business expands, there could be a high chance of fraud in the business. This will increase in this pandemic time as management staff is not able to focus 100% of the day to day business. As the owner of the business, you should have proper knowledge about accounting and finance to understand the threats and risks. Also, accounting and finance knowledge can be used to mitigate those risks.
How much Knowledge of accounting and finance any business person should have to face the COVID-19 pandemic?
It is not possible to define this much knowledge need for a business person. Knowledge need is based on multiple factors. Some of them are job role, business type, business complexity, business diversification, etc. For your benefit, I would like to classify them into three different categories based on the scale of the company.
If you engage in a small scale business, below accounting and finance knowledge is acceptable.
- Cash flow management
If you are managing an intermediate-scale business, you should have a better understanding of above mention points as well as the below additional points.
- Business planning
- Financial statement analysis
- Assets and liabilities
- Business expansion
If you are a business person in a large scale company, you need to acquire below mention financial and accounting knowledge in addition to the above.
- Stakeholder management
- Financial reporting
- Financial forecasting
- Payroll management
Both financial and accounting skills are useful as a business person in many aspects during this COVID-19 pandemic situation. Depend on your decision, you can brush up your knowledge area you are interested in. If you need to understand financial strategies and financial performance in market structures, you need to have more knowledge of financial fundamentals. But if you are interested to learn about financial mechanics in your organization and its impacts, then you need to brush up on your knowledge of financial accounting. But you should have at least basic knowledge in accounting and finance to drive your business in a profitable direction. Ultimately, knowledge is the key factor to take accurate and effective decisions in this COVID-19 pandemic to survive in the market.