One thing I notice is that entrepreneurs do not have enough accounting knowledge. I am going to dedicate my blog to providing need to know accounting information. The more you read about it, the easier it becomes to understand, the more it becomes your nature.
So this blog post I want to share with you 3 people who have an interest in your business. These 3 people are called stakeholders. Google's definition of stakeholders is a person with an interest or concern in something, especially a business.
I want to go over the 3 types of stakeholders that a business should be aware of.
A stockholder own stock in a business. They have given capital (money) in exchange for a share or shares of a business. They are owners of a business. The may own 1 share or 100 shares or even 1000 shares.
A Creditor is a lender. They provide you the ability to get loans to help grow your business. Creditors will need to look at your financial records to determine the initial loan. The will also require to review financial statements to determine whether your business still has the ability to repay the principal and make interest payments on the loan.
Most businesses have to answer to some type of regulator. It can be a public, government or independent agency. These agencies do things like administrative law or rule making. So for example if you produce food you send financial reporting to the Food and Drug Administration (FDA). So depending on the industry you are entering it may be regulated (controlled or supervised) and reviewing financial records is one of the responsibilities.
In addition, you yourself have an interest in your business.
In your business Growth
In your business Cash flow
In your business Profitability
So even if you are thinking I do not have any stockholders, I don't owe any debt, or I don't have anyone I have to report to, this is still good information for you. I want to encourage you to think bigger. You may not have stockholders right now but you may have someone that is interested in investing in your business in the new future. Just because you are a small business does not mean you are not entitled to large profits. So continue to seek the knowledge you need to grow. Customers and investors like to know they are investing in a savvy business professional.
As a business owner there are terms you should know and understand. Remember all businesses have Financial statements. If you will like a list of financial terms to help you better understand your financial statements click here and download 21 financial terms all business owners should know.