Money management adds up to success
AN essential part of being a small business owner is knowing how to set up and manage your finances.
Good financial management is fundamental to achieving business goals.
Skills in this area will dictate efficient and effective use of money.
The term is often incorrectly thought to refer to budgeting, however I prefer to use the term ‘planned spending’ as the aim is not to prevent spending but rather to better allocate funds to achieve goals.
Poor financial management is the reason most businesses fail (i.e. the lack of profitable sales).
An example of this would be selling a lot of a product that is sold at a loss instead of a profit, so the more sold, the greater loss.
One of the ways to improve financial literacy, is to make use of an accountant. They’re a great resource, especially for a start-up business.
Accountants can teach the basics and assist with decision-making.
However, most small businesses are unlikely to have an accountant involved in the daily/weekly operations, which is why it’s important to have a good understanding of financial management.
Finance is more than just money; it’s the foundation of your business.
Understanding this will help owners manage money, improve cash flow, plan future growth, meet legal obligations, identify the break-even point, maximise profits, and better understand business' strengths and weaknesses.
The SBDC’s Understanding Business Financials workshop will help owners understand and monitor business performance, spot problems before they get out of hand and help with sound financial management decisions.
For help, visit smallbusiness.wa.gov.au or speak directly with an experienced adviser on 13 12 49.
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Local Business Matters David Eaton - WA Small Business Commissioner