Top 3 Financial Skills Every Small Business Owner Should Hone
Small business owners are tasked with wearing many hats, most of which lie somewhere beyond their natural wheelhouse. But to run a successful business, it is imperative to not just be an expert in your specific field, but also be a strong student in the business of running a business. That means understanding how to manage a team. Knowing how to negotiate purchase orders and respond to RFPs. Developing HR strategies on who to hire and how to fire. You know, stuff like that. Small business owners have a whole bunch of “gottas” on their list of daily tasks, none of which likely have anything to do with the passion that drove them to hang a shingle in the first place. But by far the activity that seems to elicit the most stress and anxiety in small business owners is, you guessed it, accounting and finance.
Clean books are essential to running and growing a small business. And while getting a bead on accounting in your business may sound daunting, it really doesn’t have to be that way. Master these three essential financial skills every small business owner should know, and you are well on your way to sound financial management:
1. Learn How to Invoice. Invoicing is square one for the influx of revenue into your business and it serves a number of purposes. An invoice provides documentation of services rendered, amounts owed, and acts as a legally enforceable document. But like many aspects of small business accounting, most business owners really don’t enjoy the invoicing process.
If that sounds like you, you should strongly consider automating your invoicing. There is a ton of great software to choose from, most of which have some pretty remarkable tracking, aging, and dashboard tools. Not to mention that the invoices they generate look polished and professional.
2. Know Your Key Financial Statements. Now that you have your invoicing automated, it is time to start leveraging that financial data and incorporating it into a bigger financial health picture. The three most important Financial Statements for small business owners are 1) Your Profit & Loss Statement which reflects your gross revenue, expenses, and profits. 2) Your Balance Sheet which measures things like assets and liabilities; it is a key element in cashflow forecasting and is also a strong at-a-glance reflection of the financial health of your business. 3) A Statement of Cash Flows summarizes the movement of cash and cash equivalents (CCE) and is essentially a record of how a business spends its money. It includes comprehensive data about cash inflow and outflow and is an essential document when courting potential investors. To learn more about cash flow and cash flow forecasting, watch this free, on-demand webinar from The Alternative Board.
3. Be a Diligent Bookkeeper. Bookkeeping is the sustained process of recording day-to-day financial transactions; this can be achieved via spreadsheets or bookkeeping software like QuickBooks and others. Bookkeeping serves numerous purposes and provides vital data as it pertains to accurate budgeting, tax time preparation and documentation, and the overall financial health of your business. Business owners who keep clean and concise books tend to be more confident and comfortable in many other aspects of running their businesses.
At TAB, we have an exceptional library of informative articles, webinars, and whitepapers to support small business owners in their quest for business and leadership success. TAB helps forward-thinking business owners grow their businesses, increase profitability, and improve their lives by leveraging local business advisory boards, private business coaching. and proprietary strategic services. Learn more.