Without the capacity to master your money and business finance, you cannot realize your full potential
Entrepreneurs and business owners: are you financially aware enough to succeed? Do you find the subject of finances too complicated, confusing and overwhelming?
The main reason why many business owners and entrepreneurs end up in debt is because they are not in charge of their money. With the right knowledge, systems and practices, anyone can become money smart. The only problem is that nobody has ever showed us how we should manage this.
QUESTIONS FOR REFLECTION
- Do you understand the key financial indicators in the business that you run?
- Are you across the financial matters that underpin your business?
- Are you making decisions based on a full understanding of the key elements you should be tracking and reviewing?
Being money smart and having the capacity to manage money is the foundation of successful businesses. Without the capacity to master your money and business finance, you cannot realize your full potential. Even if you have great products, the best business systems and smart marketing strategies, if you are ignoring the financial side of your business you will not be sustainable. According to a study performed by Jessie Hagen of U.S. Bank, 82 percent of businesses fail because of poor management of money and financial matters.
The number one reason many business owners fail to become money smart and financially savvy is simply because they never choose this. In fact, most people are not aware that being money smart and financially savvy is an important skill for them to create a thriving business.
There are too many people working very hard in their business, without making any money. That’s not a business, that’s a hobby. It is crucial for businesses to have enough money on hand to pay for expenses and to purchase needed assets. Without adequate money coming through your business, you won’t be able to cover your monthly expenses or even consider expanding your business.
Happily, there is a different possibility. You can change this by changing your choices. You must begin to think differently about the way you run your business.
So, if you are genuine about changing the course of your financial future, make a 100% commitment to being money smart and expanding your capacity to be in charge of your money.
This is about creating a different possibility in your business, in your life and in your financial reality if you really want to create something different.
Make a commitment to do whatever it takes to create this. You can change anything, and you can make anything different, but you have to claim, own and acknowledge that capacity.
That means you have to be willing to take action and be willing to be and do something different to change what you’re currently doing that isn’t working for you.
Are you willing to take 100% commitment, make choices, face challenges and be willing to change everything all the time?
Why is Money Smarts Crucial in Business?
Did you know that the majority of businesses fail within their first 5 years?
A large reason behind this is the fact that many business owners fail to educate themselves about money and finance. Having a business but not being aware about money and not having knowledge of underlying financial matters is a bad position to be in.
Money Smarts are the building blocks to your success. One thing that almost all wealthy people have in common is that they are money smart and they are good at managing their money!
Whatever you achieve financially in your business will be the result of your capacity to make money moves that work for you. Whatever you achieve in the next 10 years will be the upshot of what you choose now. If you keep doing what you’ve always done with your money and finance, you’ll just get more of what you’ve already got. But you do have the choice and the power to make an incredible difference to your business and to your financial life.
QUESTIONS FOR REFLECTION
What choice could you make that you’re not making, that would create a different financial reality for you, for your business and for your future?
You can continue to not educate yourself about your finance and ignore the underlying financial realities. Or, you can make a different choice to become aware of what you need to know in order to create a strong financial base from which to grow your business and create a different financial reality.
You can alter your financial reality by altering your choice. If you don't know anything about finance, then most of your financial results you might achieve will be due to luck, and a lot of that luck can be bad.
Every choice you make about money and finance is either growing your money or shrinking it.
Your lack of financial literacy and financial awareness may lead to owing large amounts of debt and making poor financial choices that can have negative consequences on your business and your personal financial well-being. The reality is that any business owner can acquire these capacities and skills.
Becoming financially literate and aware isn’t overly complicated. However, it requires a whole new way of thinking and seeing the world. It’s a discipline! And like most disciplines, it can be cultivated and polished.
Start by learning the basics of your business finance
Your business will record numerous transactions over time. These transactions reflect your financial positions and need to be accurately represented.
- Do you know how much revenue your business earned over a specific time period?
- Do you know the costs and expenses associated with earning that revenue?
- Are you in touch with your cash flow (business’s inflows and outflows of cash)?
- Are you currently debt free, or are you taking deliberate choice and actions to reduce your debts?
Are you able to answer “yes” to these questions? If so congratulations! You’re probably among the fortunate few who have achieved real financial literacy.
Here are the basics of how to build and improve your financial capacities and skills
In a nutshell, financial literacy means having the ability to evaluate both business finance and your personal financial situation, so you can make the right decisions about money on a daily basis.
- Always be on top of your cash flow. It pays to conduct cash flow assessment and cash flow projections often to make sure your business has enough money to keep running.
- Monitor and manage your accounts receivable and accounts payable systems. Make sure that they are operating effectively.
- Be knowledgeable and proficient with the major financial statements that reflect your business activities and profitability... The balance sheet, Income statement and statement of cash flows.
You don't need to be a financial expert to succeed in business. What matters is that you work towards being as financially proficient as possible.
Learn to understand what metrics matter most for your business and how you can measure and improve these over time. If you don’t know how to read them, invest in some coaching or education so you can start taking control of your financial position