Commit to improving financial literacy
One of the most effective habits a business leader can invest in is improving their financial literacy.
“There is a direct correlation between improving your financial literacy and business success,” explains Tanya Titman, Head of Strategic Innovation and Financial Educator at BDO.
“A business owner or manager’s level of financial literacy affects the speed and success of their businesses growth. The ability to confidently articulate the businesses current and future financial position impacts access to funding and your relationship with financial lenders. Using tools and strategies for managing cash flow will improve your financial stability and gives business leaders’ greater visibility and confidence in future growth strategies.”
There are many aspects to becoming financially literate. Consideration should be given to investing in both the business owner as well as their leadership team.
Learn the language
For many business owners understanding their numbers is like learning a new language. Just like learning to speak French or Italian, you need to invest time into learning financial terminology. Take the time to understand the structure of your Profit and Loss (P&L) and Balance Sheet and the relationship between profit and cash flow. Effective business leaders empower themselves with knowledge by learning this new language.
Get financial data up to date
Without up-to-date, accurate financial information, you are unable to make informed, strategic business decisions. Leveraging cloud technology not only streamlines the financial operations within your business, it also delivers insights into your financial position in real time. BDODrive can assist with transitioning your business to cloud accounting and recommend the best apps to ensure your financial data is captured seamlessly in real time, so you can make better business decisions.
Review financial reports
A critical habit that is common amongst effective business leaders is the regular review of financial reports. Once a month you should ensure your financial data is reconciled and up to date, only then should you generate a (P&L) and Balance Sheet for that month. These numbers tell a story about your business. Effective business leaders should invest in improving their financial literacy so they can read this narrative.
Build a financial road map
Once you can speak the language and interpret your financial reports, the process of building a financial road map is more achievable. As mentioned in Habit One, the strongest performing companies tend to have a clear vision, strategy and road map. BDO Advisors recommend this plan is grounded with a comprehensive financial strategy, a 12-month budget that defines where your business is right now, where you want to get to and how to achieve this goal.
Habit Four explains effective businesses focus on sales growth. Building a financial road map that details the monthly revenue targets and minimised operating expenses to deliver bottom line profit, delivers an action plan for growth.
Business leaders who investment in the habit of improving their financial literacy make more strategic, informed decisions based on up-to-date financial information. Delivering high growth strategies and business success is more likely with enhanced financial and business acumen.