COVID-19 has brought about drastic societal changes and highlighted our economic system’s vulnerabilities. A lockdown of more than a year crippled the economy of most countries. It disrupted their profit margin, making them take the tough measures of laying off employees or permanently shutting down their businesses. However, during COVID-19, some small startups and businesses grew and made huge profits owing to digitization, online presence, and lockdowns.
Unfortunately, those startups could not sustain themselves for longer due to their short-term business model, financial ignorance, and inadequate resources. A survey revealed that one in 10 small business owners considers the lack of financial management knowledge the greatest barrier to business success. To deal with this issue, business owners should acquire financial knowledge.
How To Gain A Better Understanding Of Finance?
To develop an understanding of the basic jargon of finance and accounting, you can get help from finance books and online sources. Additionally, you can consider university programs to improve your accounting and finance basic knowledge.
Most business owners cannot attend a course physically due to their business meetings and management responsibilities, but thanks to advances in technology and digitization, online courses are now available; one can take any course from anywhere at flexible times.
Several reputable universities are offering online MBA accounting programs tailored to small business owners. These programs help them understand finances, analyze balance sheets and develop management skills to make their businesses successful.
How To Make Your Business Financially Stronger?
In addition to getting enrolled in the online course, young entrepreneurs can improve their financial understanding by following the tips mentioned below:
1. Establishing a long-term business strategy
The idea of embarking on an entrepreneurial venture intrigues students; they start their journey but do not take time to develop a comprehensive long-term strategy for the startup.
Having no long-term strategy makes managing finances, human resources, and setting profit margins difficult. The online business course allows individuals to learn about long-term business strategy, allowing them to set multiple smaller goals to help manage their finances.
2. Understanding the growth stages
A company’s financial needs are dynamic as they change depending on its growth stage.
Start by focusing on the value you bring to the market and gaining the trust of your customers. You can improve your financial situation by strengthening your market position. Consider the exit strategy, identify signs of financial intelligence, and manage the company optimally.
3. Conducting monthly budget analysis
Budgeting is the key step in managing finances, be it a family runner, a small business owner, or a chief financial officer of a multinational firm. Firstly, reduce capital expenditure (CAPEX) and operational expenditure (OPEX) by determining the cost of the equipment, buildings, land, and utilities they need. Afterward, devise a system to effectively create and monitor the budget to help you make strategic decisions. Analyze the quarterly reports to identify the areas which can make your business more profitable.
4. Performing the market research
Conduct market research to identify competitors, their products and services, and their pricing mechanisms. Use the SWOT analysis to determine the market’s strengths, weaknesses, opportunities, and threats. Have a customer-centric approach, and identify your customers’ needs and the amount they are willing to pay for the products and services. You can use data-driven analysis to devise a market strategy for existing products and launch new ones.
5. Focusing on process efficiency
Spend time analyzing the work processes and the project management techniques your business follows. Instead of following the traditional work processes, adopt new project management techniques like the agile project management technique. Work breaks down structure and sprint planning, which divides large, complex projects into smaller, more manageable chunks. It ensures a high delivery standard with continuous feedback, thus gaining your customer’s trust and benefitting you in monetary terms.
6. Embracing the latest technologies
People who did not shift their businesses to the internet during COVID times suffered a huge loss and eventually had to close their businesses. So, to be successful, small business owners should keep themselves updated with what’s happening in the market and adopt cutting-edge technologies.
Rather than following traditional marketing practices, they should use digital marketing like email marketing and increase their presence on social media platforms. Using online tools such as online banking systems, customer relationship management software, website monitoring, and secure cloud-based document storage tools allow business owners to operate from anywhere around the world, thus, enhancing accessibility and productivity.
7. Acquiring financial management software
Instead of relying on traditional bookkeeping practices, financial management software makes small business owners more knowledgeable about their finances. Finance software automates processes and reduces the likelihood of errors. It helps to track finances, invoice customers, file taxes, and manage a budget.
Nowadays, cloud-based management tools have built-in data visualization tools for developing dashboards and conducting financial analysis, demonstrating the true picture of where the company stands in terms of finances.
8. Hiring a financial consultant
First, learn the basics of finances and understand income statements, balance sheets, managing cash flows, and key metrics. In addition, find a financial mentor who can give you an expert opinion and help you make crucial decisions for your company. They can help in projecting the cash flows, analyzing the financial data, suggesting cost-saving techniques, and preparing the business for future growth
9. Joining Industry or Professional Associations
The associations are a knowledge-sharing medium where industry professionals discuss industry-related topics such as recent industry trends, legislative rulings, and technological advancements.
In addition, these associations make some resources available to their members that are vital for gaining financial independence. Also, it allows you to interact with industry experts and expand your network.
Finance management can either make a small business successful or lead it to bankruptcy. Learning the management of finances is not that difficult. To begin, develop an interest and learn the basics.
Your expert financial knowledge can streamline the future growth prospects of the company and ensure profitability in the longer run. Designing long-term business strategies, implementing the latest technologies, and enhancing the efficiency of systems help small businesses become high-profit, large businesses.