For many business owners, managing the books and dealing with the financial aspects of the business is a dreaded chore. Yet, financial knowledge is integral to business success. Without a firm understanding of sound financial practices, business owners can easily overspend – or underspend – which leads directly to distress and failure.
A study by S&P found that just over half of American adults are financially literate, meaning they have a firm grasp on financial concepts and tools to manage their money. Unfortunately, not every small-business owner is inherently financially literate. Fortunately, with just a few changes, even the most financially inept owner can improve his or her financial skills.
First, Consider Returning to School
It is possible for small-business owners to teach themselves the fundamentals of finance – but they should remember that self-guided learning isn’t easy. Informal education requires diligence and self-motivation, not to mention plenty of free time and freedom to experiment. Few entrepreneurs have these qualities to spare.
Instead, formal education provides small-business owners with the tools they need to learn, including lesson structure, knowledgeable experts, and opportunities to practice. Plus, small-business owners can enroll in online school. Online programs offer the flexibility small-business owners need, so they can devote time to their budding brands and gain financial literacy. MBA programs are ideal for business owners as they provide not only finance instruction but also information and skills for advanced leadership. Thus, small-business owners should consider seeking the best online university for MBA degrees to bolster their financial literacy.
Next, Acquire Financial Tools
Once an owner has the appropriate mindset and knowledge foundation, he or she can begin learning about and fixing up his or her small business’s finances. However, instead of jumping in head-first and revolutionizing the business’s finances all at once, it is safer and smarter to start small. In the beginning, it is wiser to schedule financial investigation and decision-making for just a few times every week; otherwise, small-business owners might become overwhelmed with financial data and options and make poor decisions.
While sifting through business finances, it helps to have a few critical financial tools. Those business leaders not already well-equipped should consider acquiring:
- Business plan software. This program helps even established small businesses better understand their financial health and goals. There are free online kits, like SBA’s Business Plan Tool, as well as robust paid programs, like LivePlan.
- Accounting software. This program will handle the bulk of a business’s finances. It should be able to manage expense tracking, billing and payroll processing, tax preparing, and invoicing. QuickBooks and Xero are good options.
- Budgeting software. This program assists small-business owners in drafting and maintaining viable business budgets. Many accounting programs offer budgeting tools, but one excellent stand-alone product is PlanGuru.
- Financial analysis software. This program keeps business leaders informed of critical financial numbers, such as profit and loss statements, cash flow statements, and balance sheets. Score’s templates allow owners to prepare this information themselves.
- Inventory management software. This program will monitor available inventory and alert leaders when more acquisitions must be made. QuickBooks has an inventory manager, but Zoho is another useful tool.
- Credit card processing. This service allows businesses to accept credit and debit payments. Online vendors can use digital services like ACH payment systems or PayPal; offline businesses should consult their financial institutions for possible options.
Finally, Hire Financial Experts
One of the biggest mistakes small-business owners can make is assuming responsibility for every little task. The inability to delegate duties – especially those duties that require particular skills and knowledge – stifles growth because it severely limits what a business can accomplish. Business leaders who can’t or won’t entrust others with responsibilities ultimately fail to make decisions or perform actions that only they can do, so the business fails.
Business owners who accept their financial illiteracy and have no intentions of improving it should seriously consider hiring workers to assume financial responsibilities. MBA grads, finance experts, accountants, and others are much better equipped to manage the financial aspects of a business than a financially illiterate owner. Even if it means relinquishing some power, outsourcing those crucial financial tasks to someone with higher financial literacy is a smart move for the business.