Business owners and corporate leaders may know a lot about their industry and their operations but not a bunch about finances. Many small business owners simply pass along their financial duty as soon as their business is big enough to do so. Who wouldn’t want to do that? When your business has finally grown enough to hire a highly qualified, financial guru then why wouldn’t you do so? Isn’t it in your best interest to get a knowledgeable professional that specialises in business finances?
Financial Upskilling Empowers You and Your Business
There’s no good reason to be intimidated by financial matters. Acquiring both micro and macro financial concepts is possible for everyone. Both you and your business will flourish once you become a hands-on leader that can take care of unglamorous stuff like balance sheets and tax rules.
Of course, it’s worthwhile to proactively upskill your management team but why stop there? Outstanding leaders and C-suite executives are ultimately responsible for guiding a business. Part of that role includes both having and using strong financial management skills.
Being able to interpret your company’s facts and figures and what the numbers are telling you is a wonderful ability. Being confident in your financial adeptness will help you make better decisions.
How’s Your WCC?
Has your Working Capital Cycle (WCC) been doing well lately? Do you even know what the WCC is and what it does for your business? The relationship between cash, debtors, and stock/WIP is your WCC. In basic terms, it’s the time you take to convert net current assets and existing liabilities into cash. WCC is the efficiency and ability you have to manage your liquidity position.
Think about the cash you have and the inventory you buy. You eventually sell that inventory, create an invoice, and enter the accounts receivable. The client pays you and you use that money to buy new inventory and extra supplies like energy bills, office rent, employee payroll, and so on
The WCC is the life force running through every business, including yours. This cash cycle needs regular attention, care and maintenance to keep it running efficiently. Understanding what drives the WCC for your business, where the cycle can run more effectively and where some of the kinks need to be worked out is a financial basic. The next step is managing the cycle, so it generates more cash for your business.
Get to Know Business Insurance
One of the company expenses is usually business insurance. It doesn’t take a money wizard to know that you want affordable business policies with comprehensive coverage. Occasionally you’ll need to step up and make sure the pricing is on point and the coverage are enough to make your company whole again, should anything bad happen. A good way to know your business insurance policy is to consult an insurance agent to compare quotes across multiple companies.
Make Your Money Turnover Faster
The connection between debtors, cash, creditors and stocks is ever-changing but will go on forever. Small business owners, like yourself, will benefit from how cash flow operates, what makes it move quicker, including reducing customer credit periods or cutting the time it takes to move inventory to a sale.
Sometimes you just need to listen closely to your financial folks and soak up all their small business financial expertise. You’ll learn over time common financial concepts, what to look for when reviewing your books, and what to do to make the most money possible. And one day, understanding things like working capital cycles, margin vs. mark-up, and financial operating cycles won’t seem like reading hieroglyphics. Small business financial terms will one day be your primary language.