As a small business owner, how financially literate are you?

[untreue]

April is Financial Literacy Month! I've mainly been a bit of a "work first" business owner which means I just get down and do the client work, and worry about the business side of things later. This is great in the beginning of business but kind of gets worse as things drag on.

I found a survey by vCita
that tested my knowledge. Turns out, I'm not very financially literate, and need to improve. Any suggestions? Should I get an accountant?

Questions are here in case you don't want to click (if you do their survey there is a $30 gift card and it does take like 2 minutes. Just a heads up, I'm not affiliated).

1. How well do you understand your business’ cash flow?
2. What’s the first thing someone should do if they just started a business?
3. Do I know my business credit score?
4. How detailed is your business budget?
5. How would you describe your business’ financial situation?
6. How many business credit cards do you have?
7. Can you understand a profit and loss statement, a cash flow statement, a balance sheet, or a tax return?
8. How well do you understand your business taxes?
9. What is your attitude towards financial literacy?
10. Have you considered hiring a financial advisor to help me with my business finances?
11. Do you have a business savings account and deposit money into it monthly?
12. Which of the following do you currently have?

And two more!

 

[starflower]

@untreue Even though it's a small business you've gotta do the financial side too if you ever want to grow, I think being a small business every cent counts and I can answer all of these, if not I'd have to get a financial adviser ASAP, thanks for the $30 vCita.

 

[maniel]

@untreue There's a gift card m8, you didn't need to share the questions, I'll do the survey.

 

[tammyinga]

@untreue When I started my business (22 years ago) I probably didn't know the answers to any of these questions. I was also really bad with my personal finances. It was a long difficult process, but now I can confidently say I can answer all of these questions and then some.

If you're struggling understanding business finances, I'd recommend reading Financial Intelligence for Entrepreneurs - it's an excellent book for entrepreneurs with little or no financial background. I also read a few articles and books about bookkeeping so I could understand the process of double-entry accounting and better understand where the financial reports come from.

Once your business is growing and you have a few employees I'd absolutely recommend applying to the Goldman Sachs 10,000 Small Businesses program. They have cohorts at several different colleges around the country but if there's not one close to you there's also the national cohort (which is what I went through). It's kind of like an intense, condensed MBA program but instead of working on case studies or fictitious businesses, all the exercises are about your own business. The culmination of the program is a 5-year strategic growth plan for your business. The modules on money & metrics and growth through financing were especially insightful. I used to be a "no debt" kind of guy (after getting out of lots of debt when I was young and stupid) but I learned that debt can be a really effective way to grow your business and can enable you to grow a business much faster than by reinvesting profits alone. It was really eye-opening.

It's also a scholarshipped program meaning if you are accepted, it's completely free. Since I was in the national cohort I did have to pay for some travel expenses but they were minimal.

 

[carold55]

@tammyinga I am in the same position you were 20 years ago pal, I don't know how to answer these but I'll check I guess and give it a try, lol

 

[jessicagrace927]

@untreue I removed most of my Reddit contents in protest of the API changes commencing from July 1st, 2023. This is one of those comments.

 

[pewdiepie]

@jessicagrace927 Maybe that's a good thing and I'm pretty sure it must be but do you think that would remove the need for financial advisors, accountants and stuff?

 

[jssusislord]

@pewdiepie We should be aware of these things but doesn't mean we don't need help.

 

[jessicagrace927]

@pewdiepie No, you definitely need advisors. But you need to know enough about this stuff to a) get a feel for when you are being played, and b) bring some of your own thoughts to the conversation, instead of just blindly following 'best practices'. Remember, nobody knows your business better than you, all its ins and outs.

Just as a small example, several years ago when the ACA was new, I ran a home-based business with a lot of travel. We had so many write-offs, it was glorious. But every time I had my taxes done, I had to remind them explicitly that they could not take so many write-offs that they dropped us off the ACA coverage cliff, since that would require us to pay back our $1k/mo health insurance rebate.

You need the advisors for the depth of their knowledge of law, context, and loopholes. But you need to know enough to be your own advocate. Otherwise you're just a figurehead.

 

[monteviste]

@untreue IMO it depends on what business you're running but knowing the answer to these questions as an owner wouldn't hurt, I was not financially literate too and definitely needed to get a financial advisor, so should you before you go down, or at least if you're doing good I'm sure it will help improve your business, I'll do the survey just for fun to see if I'm fully financially literate now.

 

[faithwriter17]

@untreue You should definitely hire a financial advisor.

 

[jssusislord]

@faithwriter17 He definitely should, we're doing this for profit and this is very important for everything to go smooth.

 

[kelinca]

@jssusislord Highly important, this survey should be spread around so people see where they stand.

 

[mfjackal]

@untreue Honestly I wasn't aware Aprils is the Financial Literacy Month, I'll check the survey out, hope I get them right for the sake of my business, lol

 

[613jono]

@untreue Hi! I work for a SaaS startup and we want to helps founders overcome the financial learning curve and build investable businesses.

Basically, our software turns your accounting data into AI powered professional financial models and live reports! Forecast cash flow, test scenarios and build investor ready models quickly and easily.

Check it out here: https://www.gini.co

Feel free to send me a message - always happy to connect