(Illustration: Robert Saunders/Theispot.com)
Fiscal literacy is one of the most important skills that you can have. This is an especially critical skill to have if you are trying to start or run your own business. Let’s take a look at what it means to be fiscally literate and how you can improve your money management skills if need be.
What Is Fiscal Literacy?
Fiscal literacy is the idea that you are good managing money and have a general understanding of basic financial terms. As a business owner, you should understand how to calculate markup on an item, how to determine your corporate tax rate and how to calculate the annual percentage rate on a loan. You should also be able to determine if you are cash flow positive or negative for the year.
When Does Fiscal Literacy Come In Handy?
Knowing how to manage money is a part of every aspect of running your company. If you don’t know how much a certain product generates in revenue per day, you have no idea if it is worth selling to customers. If you don’t know how much you pay in payroll costs or how much your rent per square foot is, there is no way to tell if you are truly making a profit each time that you sell a product or service.
Financial Literacy Helps When Funding Your Company
Those who are financially literate tend to have an easier time getting investors or lenders to provide cash for their businesses. This is because they have an easier time explaining how the company makes money and how long it may take to turn a profit.
When you can easily answer questions about money, it helps a lender understand how it gets its money back or helps an investor understand how he or she earns a return on his or her capital. Those who are looking for short-term funding may wish to turn to companies such as AFN as they offer competitive rates and repayment terms to help small businesses overcome cash flow issues.
What Can You Do If You Aren’t Fiscally Literate?
The most important part of running a business is knowing your numbers. Therefore, if you can’t read a financial statement, you should learn to do so before you start your company. Even if you have a friend or professional accountant help you with your books, it is still up to you to know your numbers. This is the only way to ensure that no one is stealing from you or paying less than they owe for goods or services.
If you don’t have basic fiscal literacy at the moment, it may be a good idea to enroll in economics or financial courses at a local community college. You may also want to start following blogs written by financial experts or follow them on Twitter. This can give you a foundation that can be used to help you make financial decisions for your business and in your everyday life as well.
Fiscal literacy is a mandatory skill that all business owners must have to be successful. If you don’t know your numbers, your company will either fail or will not reach its full potential. Therefore, it is important that you find a computer program or some other tool to help you manage your books and better manage your company’s finances.