Financial literacy can go a long way in keeping your business profitable
Cash flow, balance sheet, income statement, equity financing. Do you know what these terms mean and what impact they could have on your business?
There are many different aspects of starting and growing a successful business and every business owner has their own skills, strengths and weaknesses that they bring to the table. If you are starting a business it would be a good idea to brush up on your financial literacy. Financial literacy means having the knowledge required to make responsible financial decisions.
To keep your business profitable you need to know your numbers. As a business owner you need to be able to manage, track and analyze some of the following areas:
- Cash flow
- Costs of goods and services sold
- Payroll costs
- Burn rate
- Depreciation values
- Costs of acquiring new customers
- Sales trends
You may want to use the services of an accountant, but it is important for you and your employees to be able to understand what those accounting reports and tax statements mean to your bottom line. It is crucial for you to have in depth knowledge of both your business and personal financial situation.
As an employer you also want to foster the numeracy skills of your employees. It would a useful to have staff understand the basics of budgeting, estimating and analyzing data. The more they know the more they will be able to make recommendations that will help keep your business profitable.
If you are planning to expand and grow your business you should be able to provide potential investors with an accurate financial picture. You need to be able to answer investors' questions in a confident, professional and knowledgeable manner. You may also want to regularly review and understand the credit score for your business especially if you are looking for additional financing or credit.
Ways to increase your skills
- Take courses from a college, university, associations or other groups
- Use online financial planning resources and tools
- Seek guidance and ask questions from your business peers and experts
- Participate in workshops, online chats, and social media groups
- Practice making a budget in both your personal and business matters
- Visit the Managing your finances section of our website
Being able to analyze the financial state of your business can go a long way to ensure its success!