Last week a designer sent me a DM asking what software she should use to manage her finances (she told me she was currently running her entire business out of Excel 😳).
It got me thinking that she's probably not alone and that many business owners may be running their businesses via paper, basic spreadsheets or poor systems.
But running a business means taking responsibility for its financial health, whether you're "good" at numbers or not.
Financial literacy is especially important if you’re:
➡️ taking money from clients
➡️ have staff or employees that rely on your business to pay their own mortgage/rent/life etc.
➡️ want your business to succeed
➡️ don’t want to get scammed or ripped off by advisors or suppliers who understand more than you do
So I thought it might be useful to share some of the basic skills you'll need:
✔️ understand numbers and spreadsheets well enough to be able to spot problems early
✔️ know how to price products/services effectively (taking into account value of your work, client budgets, profit, risk, market conditions, client expectations etc.)
✔️ know how to manage cash flow week to week (especially if you pay for materials/trades)
✔️ be able to set and control budgets (both for your business as well as for your individual client projects)
✔️ know how to read a profit and loss statement and know what is driving results (or lack of results)
✔️ have basic book keeping skills so you can keep accurate records and make sure nothing becomes an expensive problem later
✔️ understand your tax obligations and common traps (e.g. not setting aside tax in a separate account and getting caught later when it's due. I have a completely separate bank account where my tax obligation payment is kept so I never accidentally spend it)
✔️ the ability to assess and manage financial risks associated with running your business or for client projects (e.g. making sure you set policies around progress payments, non-paying clients etc.)
✔️ know the basics of how to use your accounting software e.g. Xero, MYOB, Quickbooks
✔️ know how to run payroll correctly, including knowing the laws around super/entitlements
✔️ know when to escalate issues to an accountant or advisor and be able to ask better questions when you do
You can learn most of these skills by watching YouTube videos. I have never had formal financial training but I have made sure that I have taught myself enough to be able to understand what is going on in my business and be able to identify risks before they become a major problem.
