Last week we looked at the qualities you need if you hope to run your own business: we were considering things like commitment and determination. But one skill that is essential if you decide to start a business is some knowledge of how finance works – basic accounting concepts, how to read a balance sheet, how to prepare a budget, how your cash flow works, costing and pricing.
If you don’t know how to read/prepare a profit and loss account, then how will you know how well your business is doing? If you don’t know how to prepare a budget, how are you going to decide on the best way to spend your money over the next few months and whether you can afford the equipment or staff that you need? If you don’t know how cash flow works you’re soon going to start running out of money if you pay a big bill before you collect money that’s owed to you. And you won’t be running your business for long if you’ve no idea how to price your products or services so that they are competitive but still make you a profit.
These are all areas that can worry and confuse people starting up in business and that’s where our Finance for Non-financial Managers course can be so useful. But it’s not just for people who are running their own business. There are lots of people working for large and small companies that would benefit from a better understanding of the company’s finances. If you are a manager you may be asked to prepare a budget for the next 12 months for your department. Would you know how to do this? If you are hoping for promotion, it doesn’t hurt if you can discuss finance in a knowledgeable way. Imagine turning up at a meeting where people are discussing profit and loss accounts or a balance sheet and you haven’t a clue how to interpret the figures. Embarrassing!
But, you know, having a good grounding in finance isn’t just important for business – it’s essential on a day-to-day basis at home. It’s so much pleasanter if you know that you are living within your means; making sensible decisions about where to put your savings; ensuring that you’re earning more money each week or month than you are spending. Everyone should be financially savvy so that they understand how to select the best mortgage deal, get a decent rate of interest on their savings and budget to afford a new car or holiday when they need it. You’d be surprised, though, by how many people never give this a thought and then wonder why they’re overdrawn at the bank or up to the limit on their credit card.
So, I know it’s not New Year – but why not make a resolution to learn more about how your finances work, both at home and in the office?
Author: Diana Nadin
