Financial literacy for entrepreneurs, in a recent survey, believe that a lack of financial knowledge is a barrier to their success.
According to the survey, about 25% believe that their own inability to read balance sheets and income statements are holding them back.
Why is this important? When a small business owner is going for a loan or seeking investors money, the first thing lenders want to know is the financial health of the company.
Lenders are horrified when they learn that the small business owner does not have any profit and loss statements.
After speaking to some bookkeepers in Newmarket, who privately tell me some of their clients have no clue what is happening in their business.
Having said that, how can this situation be improved? I’m going to list the essential points to improve your financial literacy.
Improving one’s ability to read income statements and balance sheets will help take your business to the next level:
Improving financial literacy
The first step in improving your financial literacy is to take a basic accounting course at a local college or university. The benefit is an improvement in your understanding of accounting.
This does not mean that you are training to be a CPA. Rather you are getting an introduction to the world of finance so you can read and interpret financial statements.
The benefit to you the business owner, you now have an understanding of what is going on in your business.
Understanding the finances of your own business never hurts. As an extra benefit, now you can understand what the accountant is saying to you.
It is better to know a little bit about all aspects of your business, then know everything about one aspect of your business.
Read Books and Magazines
Getting a head start on your financial literacy is a super easy as reading books and magazines that are tailored towards money matters. This is another good starting point for improving financial literacy.
Magazines like Canadian Money, etc., are a good start. The goal is to learn as much about finances as you can. The more you know, the better money decisions you can make.
The sooner you get started on improving your financial literacy, the better off you are. It is never too late learn about investments, investing, estate planning, social security, how credit cards work, credit scores, saving for the future, social security, real estate, insurance, retirement, and taxes.
The key is to address one topic at a time. Start with a topic that interests you the most to improve your foundation of financial literacy.
Start an Investment Club
The investment club idea is a good idea to learn about stocks, bonds and to make a return on investment. The investment club is a long-term commitment for a group of say five to fifteen people.
This is by no means an exhaustive list, rather it is a starting point to improve your financial literacy
Mathew Jazenko is principal of MRJ Financial Solutions. Contact Mathew today to help you get a handle on your business finances.289-500-1978 or firstname.lastname@example.org