How Can Business Owners Become More Financially Minded?

You don’t have to be a mathematical genius to learn how to be smart with money. One of the biggest obstacles facing small business owners is money. How to get enough of it, how much of it you need to run a business, how to save or invest it. Money is a pretty big aspect of business, and even if you’re planning to hire an accountant, it’s essential to know a few things about economics as a business owner.

The basics of economics are learning how to budget, save, and keep track of your ingoings vs outgoings, and therefore how much of a profit you’ve made. There are a few ways you can learn to be more financially minded, whether or not you’re good with mathematics. 

Keep track of your spending

Think of all the little things you spend money on. Some people think nothing of spending $20 here and there on little things, but those small purchases add up fast. Learning to budget and track your spending will open up your eyes to what you really need to spend money on. Seeing your monthly income vs your spending all laid out in one place will help you gain a better understanding of money. You can use a free budget tracker app, a notebook, a spreadsheet, or anything that works for you.

Not keeping track of your spending is risky, especially when you own a business. And mixing your personal and business expenses is going to complicate things- it’s best to have separate accounts for your business and your personal budget. Without keeping track of every aspect of your budget (supplies, employee wages, overhead, insurance, advertising costs, etc.) you won’t know if your income is higher than your expenditures. 

You may look at your spending and decide to make some changes. It can be a wake-up call to see that you spent $87 this week on takeaway food, or bought those pants that you didn’t technically need but looked so good in the dressing room. You may realise your business is running at a loss, in which case adjustments will need to be made. 

Get some formal education

This step isn’t for everyone. But if you’re serious about starting a business, you may be interested in studying an MBA. A Master of Business Administration can teach you valuable financial skills as well as many other essential skills needed to run a business. RMIT’s online MBA has a number of units that can really advance your knowledge of finance and economics.

Consume information any way you can

Unless you’re reading this on a printed sheet of paper, you’re probably holding a device right now with which you can access almost all the information in the world. A large portion of that information is free and can be accessed in a number of forms. What advanced times we live in! 

There is a smorgasbord of knowledge out there. Read books and articles about finance, listen to podcasts and TED talks, watch videos and documentaries, and participate in online forums. You can absorb so much information about finance and money without even leaving your home.

Even if you’re not interested in numbers and mathematics, learning about economics can be fun! Learn about anything that takes your fancy- investing, financial freedom, budgeting, credit ratings, or anything that piques your interest.

Save for a rainy day

If you have extra money right now, don’t go out and spend it. Small businesses will always have ups and downs, and while you may have extra money right now, you may have a difficult month later this year and need to dip into your savings.

Unexpected costs will always pop up. You don’t want to be caught in a bad financial situation with no savings. Reward yourself and your family occasionally- but don’t spend frivolously just because you have extra money. 

If you’ve got enough savings to withstand future fluctuations and you can afford to spend a little, consider reinvesting some money back into your business.

Learn your own patterns and habits

Sometimes learning to be financially minded means taking a long hard look at yourself. It’s ok, we all have strengths and weaknesses. If you know you have a tendency to impulse buy or use consumerism as a hobby, admit this and work on methods to reduce the risk of this happening.

Building good habits doesn’t happen overnight, and we all have lapses in willpower occasionally. That’s why it’s important to recognise your own spending patterns and set yourself up so that your good habits can carry you through the occasional slip-up.