What does Financial Literacy Month mean for small businesses?

Officially established by U.S. Senate Resolution 316 in 2004, April is recognized as National Financial Literacy month. While many use the month to focus on individual financial wellness and education, it also makes sense to examine what financial literacy means for the small businesses that are the backbone of the modern American economy.
 
According to a recent study completed by Intuit, 42% of small business owners identify as financially illiterate. Shocking, right? Perhaps it’s not when you consider that most entrepreneurs are not financial experts, but instead are people who have a talent for identifying new ideas and nurturing them into businesses. It’s also true that most entrepreneurs are exceptionally busy people, responsible for wearing multiple hats and responsible to several stakeholders. During the business day you may be the CEO, but at home you’re just mom or dad, and maybe even the plumber.   

Nevertheless, financial wellness is key to business success, and this is especially true for small fledgling enterprises. We encourage you use the month of April to take a step back and evaluate how you are doing financially. Here are our top 5 tips for prioritizing your business’s financial wellness.

1. Stay sharp – continue to educate yourself

This April, look for opportunities to continue your financial education. Check out your local Small Business Development Center or even your bank for finance workshops. You can also seek out online financial literacy tools to stay sharp when it comes to managing your business finances.

2. Get professional accounting help

Choosing the right accountant is a big decision, and you will want to consider several factors. Some are obvious, like their degree and specialty. Others may be less intuitive, like their proximity to your office, your rapport, and whether they’ll represent you in the event you’re audited. Once you decide on the best fit, be sure to schedule regular check-ins to ensure you are on the right track.

3. Control businesses spending

While it can be easy to get overwhelmed by the sheer volume of purchase orders and invoices, it is impossible to control your finances unless you have a sense of who you owe and who owes you. Create a  and make sure that you have a sense of your business cash flow each month. Also, watch employee spending and look for opportunities to eliminate waste.

4. Separate business spending from personal spending

It’s generally a best practice to keep your business spending separate from your personal spending. Doing so can help you avoid tax problems while also saving you time when it comes to balancing your books. We suggest finding a small-business friendly bank, credit union, or other financial institution which can help you manage your business funds at an affordable cost.

5. Start a financial wellness program for your employees

Increasingly, small businesses are  for employees. When employees are under stress from their personal lives it can impact their performance in the workplace. In the spirit of financial literacy month, consider what you can do to help your employees become more financially well. 

Part of business financial literacy is planning ahead for unexpected expenses. Having the right insurance for your business can help protect you from the financial implications of an accident, a lawsuit or even a data breach. Visit hiscox.com to get a quote on the right insurance for your business.