Financial literacy is as critical as sales skills

Imagine saving €118,121 in profits just by sharpening your financial literacy. Financial literacy can open doors to long-term success and growth for small business owners. With the right financial knowledge, every business decision becomes an opportunity for improvement.

Financial literacy is as vital as sales skills.

Financial literacy is as vital as sales skills, and when paired together, they form a powerful tool for business success. As the global economy shifts, navigating finances becomes even more crucial. A solid grasp of your company's finances can help you make better decisions faster, stay ahead of challenges, and reduce stress.

Low financial literacy costs €118,121 in lost profits on average for SMB owners based on the recent study.

Financial literacy means understanding and actively managing growth based on financial KPIs.

According to a recent Quickbooks study, just over half (54%) of small business owners felt confident in their financial literacy when they started their businesses. Those who aren't financially literate may be missing out on growth opportunities. Nearly half of business owners surveyed (45%) reported losing at least €10,000 in profits due to poor financial knowledge, while 13% estimated their losses at over €500,000. Low financial literacy costs €118,121 in lost profits on average.

Example: A growing retail store

Imagine you own a small retail store that has recently experienced a surge in sales thanks to your excellent sales skills and marketing efforts. Business is booming, and customers walk through the door regularly, leading to significant sales growth. However, despite the increase in sales, you notice that your profits aren't growing as expected, and cash flow is tight. Without substantial financial literacy, we might assume that more sales automatically lead to higher profits, but that's not always the case. Here's where financial literacy comes in:

1. Cost management By understanding your financial statements, you discover that while sales are increasing, your costs (e.g., inventory, rent, labor) are rising at an unsustainable rate. Without this financial insight, your business could be headed for trouble despite the high sales volume.
   

2. Cash flow Financial literacy helps you realize that a big portion of your cash is tied up in inventory that isn't moving as quickly as you expected. This affects your cash flow, making it difficult to cover day-to-day expenses even though sales look strong. Understanding cash flow management allows you to adjust your inventory orders or negotiate better payment terms with suppliers.
   

3. Pricing By analyzing your financial data, you might discover that your sales margins on specific products are too low to be sustainable. This knowledge empowers you to negotiate better deals with suppliers to increase your margins and ensure that your sales efforts translate into actual profit.
   

4. Budgeting and forecasting Financial literacy enables you to create realistic budgets and forecasts based on your sales trends and expenses. This planning helps you avoid overspending during periods of high sales and ensures you are prepared for slower seasons.

Here's the good news: financial literacy isn't about mastering complex accounting or finance degrees. It's about regularly monitoring key performance indicators (KPIs), understanding what they mean, and using them to guide your decisions.

You don't need to be a financial expert to succeed. What truly matters is to be keen on finance.

You don't need to be a finance expert to succeed. What truly matters is to be keen on finance. When you, as a business owner, take an active interest in your finances, you can react faster to spot early warning signs, utilize potential opportunities, and confidently forecast profits. By engaging with your financial health, you're setting your business up for greater financial resilience and growth.

9/10 of small business trust their accountant as the key advisor

Accountants are invaluable partners for small businesses. 98% of small business owners say their accountant boosts their confidence in their business. And it doesn’t stop there; nine out of ten (9/10) business owners report that their accountants actively contribute to their growth.

An accountant's guidance with a regular financial report into actionable insights that propel your business forward. An insightful financial tip and an analyzed financial report are often more valuable than a bank loan. It can help you avoid costly financial pitfalls and open the door to healthier cash flow, which is key to scaling your business.

It’s important to recognize when you need support. If finance isn't your strong suit, seeking professional help from an accountant can be one of the best decisions you can make. These experts provide valuable insights like cash flow tracking, financial forecasts, and advice tailored to your goals.

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