Feel like you have no clue when it comes to small business financial management, financial reporting, or other financial essentials? Is the idea of figuring out where to start mastering specific financial skills confusing?
You’re not alone! Most entrepreneurs don’t have the financial skills and background that’s pivotal to running a thriving business. But becoming a successful entrepreneur requires knowing how to avoid losses and find room for growth.
You’ve probably realized that your financial skills just aren’t enough and you’re running into problems with your small business finances. And with that normally comes a lot of shame and guilt that you don’t know what you’re doing with your business’s money.
While you may think that the financial skills you need to be a successful entrepreneur are impossible to learn, you’re completely capable of learning the essentials to financial success when running your own business.
As a CFO and business owner myself, I’ve helped entrepreneurs just like you get a handle on their business finances with my small business financials course that teaches the basics to managing business finances.
Learning financial skills for entrepreneurs is a lot easier than you may think. The best place to start is this list of the essential financial knowledge that entrepreneurs should know, no matter where you are in your business journey.
Understanding Taxes for Your Business
If you dread tax season every year as an entrepreneur because you never know what you’re going to owe, that’s your first sign that you need to get a handle on your small business finances and learn financial management skills.
Many entrepreneurs only focus on their finances once per year.Getting a clear understanding of how small business taxes for your business work is essential to not only avoid trouble with Uncle Sam, but also help you better manage your business and plan your growth.
For starters, you should be saving money from your business to pay taxes to avoid a hefty bill come tax time. Knowing how much you should be putting aside, how to pay quarterly taxes, how self-employment taxes affect your take home pay, and more can help you really understand how successful your business is.
As your business grows, understanding the complexities of taxes can also help you make better choices about how you organize your business, how you pay yourself, what benefits you give to employees, and more.
Like most business owners, I’m guessing you’ve probably run into some trouble already with your finances because you only review spending and profits when you’re trying to get everything together for tax prep. If that’s the case, it’s time to get some help learning the basics and making a plan to deal with taxes so you can avoid costly mistakes.
Managing Cash Flow and Profit
Although it may seem obvious, managing your money goes past staying on top of your expenses and paying taxes. As a business owner, you should have a good understanding of where your money is coming from and where it’s going.
Cash flow is one of the most common issues that small businesses run into. While your business may be profitable, bills can come due before you have enough money coming in to pay them. And that’s when your business can run into trouble. If you can’t get a handle on cash flow, you’ll run into huge problems as you start to scale your online business.
In addition to cash flow, understanding profitability and where your profits come from is an essential financial skill for entrepreneurs. Figuring out where your profits come from, which activities are most profitable, and how to grow your profits puts your business on solid footing to grow successfully.
For instance, if you’re struggling with paying bills on time in your business because you’re waiting on cash to come in from clients, you’re probably facing cash flow problems. On the other hand, if you’re struggling to pay yourself, you probably have a profitability problem.
You should be able to understand and interpret your financial records and review them at the end of each quarter. Once you understand the basic financial reports, you’ll have a better idea of how your business works and succeeds.
Harnessing Technology for Growth
Most entrepreneurs are pretty savvy on technology that they use to handle the day-to-day operations. But fewer are savvy about how technology helps their companies become more profitable and successful and what technology is a waste of money.
Do you know which of your tech tools in your business are helping you make more money? Do you know which subscriptions are draining money from your business? You should have a clear idea of which technology is essential to your success.
For example, using technology to know how time is spent in your business to generate the most profit in your business is an often overlooked key to entrepreneurial success that technology can help you solve. One of the first things I do to help entrepreneurs with their finances is set up time tracking to see where they’re spending their time.
In addition to time tracking, other technology that helps you be more efficient can make a huge difference in your business’s ability to grow. Efficiency is one of the biggest problems to solve as you grow because most businesses reach a capacity ceiling at some point. The only way to overcome that problem, in most cases, is to become more efficient.
Knowing When to Leverage Business Credit
Your business may need to leverage credit to grow at a certain point. For many businesses, credit is one of the only pathways towards increased profitability after hitting a ceiling. Credit is one of the most important financial concepts to learn when you’re running a business.
Just like personal credit, your business’s credit score impacts your ability to borrow. But did you even know that your business has a credit score? If that’s news to you, understanding business credit is a must especially if you have big growth goals.
As an entrepreneur, you should have a good understanding of how business credit works, how to monitor it, and how to stay in good financial standing. Business credit is slightly different than personal credit and has to be built up over time, especially if you want to avoid tying business credit to your personal finances.
For starters, it’s a good idea to learn how to register for a DUNS number, how to build your business credit with purchases, and the basics of how business credit works. It’s also a smart move to understand how business credit can affect your personal wealth, since personally guaranteed loans or credit cards are the most common type of business credit.
Knowing the basics of personally guaranteed loans can help you avoid personal financial disasters that can come with business credit, even if you’ve protected yourself with how your business is set up.
As your business grows, you’ll also need to learn when it’s a good idea to use business credit to scale and what options you have for borrowing.
How to Improve Your Financial Skills as an Entrepreneur
If you’re an entrepreneur, you know that understanding your business in and out is crucial to its survivability. On top of running your business, you also have to be behind the scenes at all times making sure you’re financially where you should be.
It can be a lot of work for one person to handle. And if you’re feeling that guilt and overwhelm that your financial skills just aren’t up to the challenge, know that this is something you can change with the right guidance and changes to your money mindset.
Improving your financial skills when running your business can be a struggle because most financial information is written and created for accountants or other financial roles. If you don’t even know what the terms mean when you’re reading information about small business finances, it can feel like it’s impossible to learn the financial skills you need to run your business!
That’s why I created Not Rocket Finance, a small business financial management course made for entrepreneurs. If you want to finally get a grip on the “money stuff” in your business, this course is specifically made for you.
Learning essential financial skills to run your business doesn’t have to be complicated and you certainly shouldn’t be ashamed if a lot of this above list are things you don’t know (yet!).
One of the best places to start to get a handle on your finances is my small business financial health check. I’ll help you figure out where your finances are with this quick and easy process that can help you start getting a handle on money in your business.