Accounting is one of the main foundations of any company. It is a strategy. Yet, many creatives (like us) have no idea of how to manage and control finances. It is a scary road by which we feel intimidated.
Accounting is basically about balance. Setting a value, a structure, a price and understanding the market are key for success.
"Every resource can be put to alternative uses, every action, choice or decision has an associated opportunity cost" and even though such costs are not in the account books they are part of the decision making and therefore result as profit or loss.
We need to evaluate what is the demand. Does the product or service satisfy the wants or needs of our target users? What is the maximum price, our future consumers are willing to pay? Are we as company/early entrepreneurs able to create the goods and services to take them to market?
This is way more complicated than just answering these questions. There is a need for a constant equilibrium. If the price of the raw materials goes up it affects directly the price of our good but if there is a huge competition inside the same market, how much can we add? Production costs are defined by multiple areas: Raw materials, machine leasing, and repair rent, manufacturing plant, manufacturing labor, selling and administration labor, supplies (electricity, water, etc.). After defining each of these principles we need to categorize them as variable or fixed, to then correctly balance them as assets and liabilities as well as the loans or mortgages, etc.
Every company's shareholders look to maximize their wealth, but I wonder how many are supporting cultural and ecological enterprises.
We've also learned about blockchain, how it works and the possibilities it has in the market. This technology was invented for bitcoin and it works with sequences of blocks that contain transactions, these groups are chained together and then distributed among the users.
There are many cryptocurrencies (Bitcoin, Litecoin, Ethereum, Ripple, Bitcoin Cash, etc). These new currencies have many benefits but it has also many risks.
As an exercise, we were asked to design our own business model. Define Revenue, Expenses, Gain/Loss and Income. We realized there are so many things we don't have in mind! Our business idea didn't work! even though we thought in high numbers.