It’s not enough to have a great idea, passion, or even tons of clients and customers— you have to be able to manage your money in a way that allows your business to grow and thrive. If you want to scale your business, this is non-negotiable.
For businesses, financial literacy starts with bookkeeping. Bookkeeping may seem like a boring topic, but it’s actually critical to the success of any business because it is the foundation for intentional profitability. Bookkeeping is the foundation of my business’s advisory services that we provide to our clients. Without accurate record-keeping, it’s difficult for business owners to make informed decisions.
In addition to bookkeeping, we’ll also talk about other aspects of financial literacy, such as mapping out your success plan and managing your cash. If you’re ready to learn more about financial literacy for small business owners, keep reading!
Bookkeeping is the foundation
Bookkeeping is the process of recording financial transactions for a business. This includes both inflows (money coming in) and outflows (money going out). By tracking these transactions, you can get a clear picture of what’s happening in your business- where the money is coming from and where it’s going. This information is essential for making informed decisions about your business.
One of the most important aspects of bookkeeping is recording accurate information. This means recording the correct date, amount, and description of each transaction as well as placing the transactions in the correct (according to accounting rules) categories. By doing this, you’ll be able to track your business’s progress over time and identify any trends. You can also more easily detect any errors or fraud (see my blog on preventing fraud here). Trends can be both good and bad. By watching the trends, you will know what is working well so you can do more of those activities. Monitoring trends also helps you identify issues early and make adjustments before they have had a chance to cause major problems for your business.
Additionally, good bookkeeping is key to helping you prepare financial statements, such as a balance sheet, income statement, and a statement of cash flows. These statements are the very ones used in major companies (and the same ones we use in our practice) to help clients make informed business decisions.
Building a Roadmap to Success
Once you have an accurate set of numbers, you can move to the next level and create a financial roadmap. I find some owners are resistant to the term budget, as some feel it implies they are being told what to do or restricted in some way. Whatever you choose to call it, a financial roadmap or budget is a part of a solid plan for how you will grow your business. It is your plan or your vision set to numbers. By creating a financial roadmap, you can track your selling or sales activities and expenses to make sure that they align with your goals and objectives.
A financial roadmap will also allow you to set more realistic goals and objectives because the numbers will tell you what is realistically possible (the numbers don’t lie and they either add up or they don’t) or what is needed to make your plan possible.
Cash Flow Management
With solid numbers and a plan in place, business owners are equipped for making CEO-level decisions, which include cash flow management. Cash flow management is essential for keeping any business afloat. Cash flow is the movement of money in and out of a business. By managing your cash flow, you can better ensure that you have enough money to cover your expenses and have some left over for profit. Cash flow management is essential for ensuring that your business stays profitable as it grows and makes it more likely that you will achieve your goals. Again, profitability is intentional!
There are lots of other aspects of business financial literacy that weren’t mentioned here, but these are a good place to start.
If you still feel stuck when it comes to your numbers, we can help. As business solutions experts, we have helped dozens of businesses untangle complex issues and clarify a path to greater profitability. Let’s schedule a Discovery Session.
Want to learn more profitable strategies for your business? Check out this FREE guide 5 Things You Must Do If you Want To Increase Your Profits.