While business prudence is an essential component of success for a venture, having basic financial skills is equally crucial for business owners to maximise profits, understand pressing issues and rectify them. In a competitive landscape, financial acumen can be the difference between success and failure. Here are some essential financial skills every business owner should have.
Understanding financial statements
Business owners must read and understand financial statements. These statements reflect the financial health of their venture. The key financial statements are:
- Profit and loss statement
- Balance sheet
- Cash flow statement
Business owners should understand the key metrics in these statements, such as liquidity, cash, etc.
Budgeting Skills
Once business owners have a clear picture of their finances, it’s important to acquire budgeting skills. These skills are handy for planning and executing short and long-term investments. With the right skills, business owners can leverage their assets and resources to:
- Boost revenue
- Enhance productivity
- Bolster efficiency
Budgetary skills are handy while availing business loans and utilising them in a prudent manner.
Keep a Track of Invoicing
Delayed payments from clients can affect a company’s cash flow. Hence, business owners need to track the invoices. Businesses must send an invoice as soon as they render service and follow up with customers for quick payments. Advanced accounting software can help keep a proper track of invoices raised and sent.
Understand tax sops
The Income Tax Act provides many tax sops to businesspersons. It is important for businesspersons to understand the tax deductions they can avail, to plan and manage taxes better.
Tax sops help a business boost savings and improve cash flow. They can use the money saved to fund various growth initiatives.
Keeping records of the finances
The onus of keeping records of the finances of a business lies with the accountant and the owner. Bookkeeping skills help avoid unnecessary taxes and penalties.
Minute attention to their company’s financial records helps business owners identify any anomaly and take corrective measures. It is crucial to keep original vouchers, slips or invoices of all expenditures.
These financial skills play a constructive role in money management, improve revenues and stimulate growth for any business.
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