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Pennies will drop – Improve your Business Financial Literacy Posted on October 20, 2020
There’s a direct correlation between a business leadership team’s financial literacy, and business success. Those who can crunch the numbers with technical competency will more easily identify the business strengths and weaknesses that require decisions and actions.
That being said, it is understandable that most business owners are experts in a different field – not in financial management. This amplifies the necessity for accounting software and professional advice:
- Accounting software is an absolute necessity of modern business management and will produce real-time and accurate reports. Thanks to advances in technology, businesses are data rich. Financial literacy helps you to create meaning out of the data. It is the ‘so what’ factor.
- Curate your team to include Chartered Accountants. Meet with them regularly and ask questions. Anything you don’t understand about your reports is a missed business opportunity.
The three reports you need to run, understand and interrogate on a regular basis are:
|Cash flow statement||Bank reconciliation and budget.||Weekly|
|Profit & Loss (P&L)/Income Statement||Payment directions – where the money is coming from and going to.||Monthly|
|Balance Sheet or Statement of Financial Position||Company assets, liabilities, net asset position and equity. This will indicate your financial health. For many business owners, the line between business finances and personal finances is a thin one.||Yearly|
Financial literacy is not something that can be reserved for the CFO or Accountant, the entire management team needs to be able to interpret financial reports that inform the wider business strategy and leads to aligned and strategic decision-making.