Over the past few years financial literacy has been the prime focus for us. We have noticed that understanding financial literacy as an entrepreneur will help anyone grow their business. Throughout this article, we are going to discuss a few key points where understanding financial literacy will help you with your business.
What is Financial Literacy?
Financial literacy is the use and understanding of financial terminology and financial skills such as budgeting, business concepts, business analysis, and financial management. By understanding these terms, we can build a foundation for a business and grow it proportionally based on what the market can bare.
Why is Financial Literacy Important?
The first thing that we noticed by studying and learning financial terminology and the skills that developed from learning, is that all successful entrepreneurs must understand the basic concepts of finance to grow their business. By understanding our financial footprint and how our actions result in the costs accrued or profits achieved, we can make decisions that will grow the company in a more efficient and timely manner. This also allows for better decision making around drivers needed to accelerate other areas of opportunity.
First, we need to understand cash positions for business growth. By understanding financial booking processes (general ledgers used in accounting that show your assets over liabilities) an entrepreneur will be able to see where the business needs to focus on for growth. While this is very micro in terms of the day-to-day that entrepreneurs do, it is an example of the importance of understanding financial literacy.
Then, when a business has enough liquidity and the founder understands that, they will be able to make quicker decisions on where to place their funds. By having basic financial knowledge, an entrepreneur will be able leverage their financial position and accelerate their decision making.
Financial Literacy: Assets vs. Liabilities
The biggest focus that any new entrepreneur can understand is assets vs. liabilities as this is the foundation for any financial decision when it comes to cost development. Here at Pillar One Consulting we pull together all of your data to understand exactly that and to help you make those decisions even quicker and for a fraction of the cost for what an entire financial team would charge. The biggest take-away is that placing a focus on understanding the world of finance on a foundational level is what we have noticed that sets successful entrepreneurs apart from struggling firms.
If you are not sure where to start on this journey, we recommend that you click our case studies link (https://www.pillaroneconsulting.com/case-studies) as it gives some understanding to the world of decision making through the skills acquired by learning financial literacy.