Are you one of the two million small business owners in Australia making hundreds if not thousands of decisions each year that will impact the future of your business?
What strategies do you use to make your decisions? How much do you rely on financial knowledge versus instinct to choose the right path?
Experienced business owners know the numbers will always tell an accurate story – if you know how to read them.
Here are the six ways a better financial education can help unlock the secret language of your business:
Many business owners operate with limited understanding of their business finances – despite knowing that making bad financial decisions can send your business broke.
The solution? Get closer to what scares you. Learn how to run your own reports (profit and loss statement and balance sheet) and ask lots of questions. If you know don’t how to read them, invest in some coaching or education so you can start taking control of your financial position.
2. Understand where your profit went
A good year is determined by more than how much money is left in your bank account. Your profit and loss statement is the key to understanding how your business is performing; while your balance sheet shows where your profit went.
Learning how to read and interpret your financial reports is crucial to make informed strategic decisions. Like anything, financial literacy is a skill that can be developed, with the right support. And once you have a solid understanding of your financial statements – more informed, strategic decisions can follow.
3. Invest in your financial data
The days of recording financial information on a spreadsheet are well and truly over. Cloud accounting has changed small business forever so if you’re not already using software like Xero (our recommended platform), it’s time to switch over.
Xero is easy to use, can be accessed anytime, on any device. With up-to-date financial information, you can generate key financial reports in a few clicks. It’s also completely customisable, so you can tailor the dashboards to suit your business and reporting preferences.
Cashflow (or lack of it) can crush your business very quickly. Pricing, volume and debtors are the main drivers behind the amount of cash in your business. That means learning how to set the right price for your product or service; increasing the overall volume of sales and staying on top of debtors can help maximise the cash flowing into your business.
However, it must be an informed approach. For example, if your pricing strategy isn’t right, selling more stuff will increase your cash flow but not your profit. It always comes back to decisions being backed by the numbers.
5. Minimise unnecessary cash out
The flip side of managing cash in is to manage your cash out. (In terms of building your financial literacy, this means don’t skip the chapters on expenses, assets, people and inventory)
Take time to learn how to reduce your overheads, scrutinise your operating expenses, convert any underused assets, manage your stock levels and surround yourself with the right kind and number of people will all help to improve your cashflow.
Once you can read the story your financial reports are telling you, the process of building a financial road map can start. Creating budgets, achieving targets and minimising expenses gets so much easier when you understand how money works in your business.
Ready to make more informed financial decisions for your small business?
The Business Growth Program is a business coaching program designed to help you with practical skills and strategies to take their businesses to the next level. This is a hands-on course that will take you on a journey to:
- Set strategic goals for your business
- Build a 12-month financial strategy
- Implement a 52-week cash management plan
- Develop your leadership style and build a high-performance team
- Find greater operational efficiencies through technology solutions
- Create an effective digital marketing strategy tailored to your business.
To find out more about this exclusive program:
Download the curriculum for details about each workshop topic and learn what you can do for your business.