The value of financial literacy in establishing a business. Financial literacy is key in establishing a business because it equips us with the knowledge and skills we need to manage money effectively. Without it, our financial decisions and the actions we take—or don’t take—lack a solid foundation for success.
-Understand the Impact of Your Actions
Once you understand your company’s financial statements, you can track specific items that impact your organization’s bottom line. When applied to your daily responsibilities, insights into your company’s financial accounting can be a motivating factor for you and your team. Knowing the impact your actions have on the broader organization’s financial health can help you keep the big picture in mind.
-Make More Informed Decisions
If you’re a manager, financial literacy can allow you to approach problems with a new toolkit. When faced with a difficult business decision, you can confidently consider the financial implications before weighing your options and making the best choice for your team and organization. Financial literacy can enable you to become a well rounded leader who considers multiple facets of any issues that arise.
-Advocate for Your Team’s Budget
When your team is in need of money for a project or product, your understanding of finance can help you build a strong case. For instance, if your team is requesting funding for project management software, you could calculate the anticipated return on investment based on how much more efficiently the software could enable your team to work. Proving the impact on your company’s bottom line will make your case more compelling.
-Hone Your Negotiation Skills
Financial literacy can help you thrive at the negotiation table. Whether you’re negotiating salary, benefits, or the scope of a project, having an understanding of the bigger financial picture can serve you well. If the matter of negotiation will impact the financial well-being of the organization, understanding how to talk about the financial implications of your desired outcome could sway the conversation in your favor.
-Become Financially Efficient
Understanding how each of your team’s expenses plays into the liabilities on your organization’s balance sheet can allow you to assess how to be more financially efficient. Maybe there’s a service your team previously subscribed to and no longer uses, or perhaps you can find a free version of a tool your team has been paying for. When you’re aware of how each expense factors into the balance sheet, it can be easier to identify ways to be more cost-effective.
