THE IMPORTANCE OF UNDERSTANDING FINANCIAL LITERACY
Business has its own language, just like sports. If you compete, you must be able to read the score board. Businesses also have score boards. How many assets? How much cash do you have now? How much is the obligation? How much is the owner’s equity? Completely self-owned, etc. Unfortunately, especially entrepreneurs in World, the majority are not fluent in financial language. Some stutter to read the balance sheet. Currently, entrepreneurs in World and even in the world, know that money goes in and money goes out, how much is left, that’s all. Finally, the real size is not realized. There is even a pile of inventory, bad debts, lost cash. Unreadable. So, for that, it is important for us to be financially literate. Let’s learn more. So that we can be smarter in managing the business we have.
The first urgency: you know the real condition of your business today. Snapshot your business. By understanding financial literacy, you will know. The dimensions of your current business. Financial reports guide you to find out whether your business is healthy or not. And this knowledge from scratch is the basis for further steps. Now, many business people can’t read these “measures”, they only know sales. Finally did not realize if the business lost. There are also those who are not aware. He thinks debt is an asset. Finally the debt is added. Even though the debt was eroded by costs. Never “earnings”. This is really worrying if we are not financially literate. We may not realize that we are “building poverty”. Alright, that’s the first urgency, “Know the initial conditions”.
Second Urgency: You must master Financial Literacy, so you can know the impact on your business activities. Businessman friends, every time we do business activities, whatever it is, it must move our business balance. One transaction will have an impact on the balance sheet. That’s the law. If it does not affect the balance sheet, it means it is not a business activity. For example, some of the following business activities:
- You buy goods, cash decreases, inventory increases.
- You sell goods, cash increases, inventory decreases, earning increases.
- You buy tools: equipment increases, don’t forget it depreciates. And be aware, there is cash that turns static. Measure well.
- You pay for the promotion: earnings decrease, because there are additional costs. Gross profit eroded. Net income is running low, and cash is reduced.
So when you are able to see the impact of your business activities, you will be “sane” in doing business. “Ooh, if I advertise, my money will decrease, my gross profit will be beaten, my net income will be small. That means this ad has to have an impact on my business!” Well sort of. You would think, advertising must have an impact on sales. This is the result of you mastering Financial Literacy. If you need financial translations in UK, you can use kingoftranslation
Third, by mastering Financial Literacy, you can clearly see where your mistakes lie. For example, in the following cases,
Sales are already high, but there’s no cash. It turns out that there are receivables that you forgot to collect. You do not record customer debt properly.