As a small business owner, you’re probably accustomed to wearing multiple hats – Chief Financial Officer, included. And as all small businesses owners know, functioning competently in multiple roles is essential for getting your business off the ground and turning a profit. If you handle your own small business finances, you’re not alone. Eighty percent of small business owners do exactly the same.
But working in the role of CFO doesn’t make you a financial expert – you may even be a little lost when it comes to the ins and outs of preparing a P&L statement or a cash flow statement. Though squeaking by on minimal financial knowledge may save you some money in the form of payroll, you could be hurting the long-term growth and success of your business.
Where Do You Stand?
Wondering where your small business knowledge scores? Intuit has developed a small financial literacy quiz to help entrepreneurs identify their business finance strengths and weaknesses. The quiz covers three sections of questions on accounting terms, creating financial statements and applying data. The quiz offers additional learning resources throughout and walks users through answers and explanations for each question after completing the section. You can even compare your results with similar business owners in your industry.
You can take the full quiz here.
Why Financial Literacy Matters
According to a QuickBooks survey, more than 40 percent of small business owners identify as financially illiterate. Many small business owners likely use the same principles for governing both their personal and business finances – but these two entities are not necessarily the same. Managing business revenue and accurately tracking expenses are much more complicated in a business setting.
Misunderstanding business finance terms and practices could eventually mean the failure of your business venture.
How You Can Improve Your Financial Literacy
So, we know that financial literacy is important – and we know that nearly half of small business owners admittedly don’t have basic skills when it comes to finance. But what’s the solution? How can you improve? If you don’t have the money to hire an accountant or CFO, your business finances are still your responsibility for the foreseeable future. It’s on you to improve. Sixty percent of small business owners say they wish they knew more about finances. Luckily, plenty of resources are available to help you learn more about managing your money.
Seminars and webinars are a great way to learn more about business finance on your own timetable or to brush up your skills. You can find seminars through venues such as the American Management Association or SkillPath. Though these seminars or webinars typically require a fee, the skills and knowledge you’ll gain are well worth the cost of the initial investment.
You can also go the personal route and enlist the help of an accountant or finance mentor first-hand. If you know a business finance expert, you could ask for her help. Just be mindful of her time and be willing to offer her something in return for her assistance.
Learning from the mistakes of others is also a good way to sharpen your finance skills. Keeping up with business-oriented blogs, forums or sites is an effective way to learn from financial setbacks and missteps – without ever having to experience them.
Once you’ve completed the quiz and have a better understanding of your financial literacy level, draw up a plan for taking control of your business finances – and be sure to give the plan a timeline. The sooner you understand finance, the better positioned your business will be to thrive.
Money Photo via Shutterstock
I know that financial literacy is important but it is hard to do especially if you don’t have a finance background. Some businesses simply do with just hiring an accountant.
You are right. Financial literacy is very important whether it is for small or large business. It is one of the factors that affect the success of a business.