The Importance of Financial Education for Entrepreneurs
In the early days of business, most business owners are focused on attracting and retaining clients or customers. However, it is not only sales and customer management that keeps an owner busy, but many tasks might occupy the owner’s time to deliver a finished product, particularly in knowledge or skills-based industries. In the meantime, who is balancing the books and managing the business’s finances? Without a full-time accountant on staff, it can be hard to do anything more than just the bare minimum in terms of financial analysis.
A financially literate business owner is more likely to be fully in control of their business. Understanding balance sheets and income statements will lead to more informative business decisions. As a small business owner, you do not have to know everything about the financial areas of the business but gaining a good level of financial knowledge means that you will be able to manage some of the business’s finances, and in the process give yourself the best chance of building a business that can thrive. Having this knowledge will also prepare you for several challenges that you will inevitably encounter.
Access to loans is key factor in the process of expansion for small businesses. When talking to banks or investors – all of whom could be potential stakeholders – financial literacy is crucial in such circumstances. Understanding the fundamentals of financial tools will enable business owners to balance long-term investment with quarterly budget decisions, but also with staying on top of details like customers who have not paid up, suppliers who might have billed too much, or numbers that used to be “black” starting to slip into the “red”.
Financial literacy enables business owners to take full responsibility for every rand, and to maintain a sharp focus on costs and the simple measures of cash flow, all of which are critical in maximizing a small business’s chance of survival. This knowledge will also better enable you to deal with the professionals whose job it is to ensure the integrity of your business’s finances, and as a result, save you time and money.
If you would like to improve your financial knowledge or need support with accounting services, please do not hesitate to contact us.