Recent Intuit research shows half (51%) of all small business owners are doing their own BAS, yet only 12% claim to have a thorough understanding of business finance. It’s no surprise then that one in three (32%) small businesses fail due to financial mismanagement, and 12% fall apart due to inadequate bookkeeping. And what’s even more stunning is that learning about proper accounting processes and business finance isn’t a big undertaking.
Learning Isn’t a Big Investment
A little bit of learning goes a long way, especially these days when training and development in Australia is so cheap. The University of Melbourne, for example, has launched a four-week online introductory course on accounting principles and financial analysis. Courses such as these: a) are tax deductible; and b) set you up to push your business further into growth. It really boils down to how you value your time, and whether it would be better spent growing the business – but a stitch in time, saves nine!
Practical Ways to Start Learning Business Finance Today
If money and time are scarce, the internet has a wealth of free business finance information just waiting to be absorbed. For starters, you can subscribe to a finance blog, such as Get Rich Slowly. If you’re more of a podcast person, check out Entrepreneur On Fire, which is considered by many to have a very fresh, engaging outlook on entrepreneurial enterprise. Podcasts are excellent for commutes, or while doing house chores, making your down time even more productive.
If you’ve got a few bones lying around, you can always invest in a book on business finance. The book The Ten-Day MBA comes highly recommended, and you can pick it up for $25.
Building a Financial Model That Works
Making a perfect financial model first time isn’t realistic, but it is important that you build one – regardless of how broken it is. It will force you to consider how your business makes money, and sets you early goals, which will be vital to your company’s success. To help reduce the amount of ongoing adjustments you need to make, it’s important to consider:
- How many expenses the business will have: List them all – one-off costs, such as insurance or licence fees, equipment costs, premises costs, and compliance needs. Make sure to talk with other business owners about the costs that surprised them and factor those in as well.
- Build it from the bottom up: Look at creating a step-by-step plan of taking your product or service from an idea to placing it in the customers’ hands. Build out each step thoroughly and tactically; think about marketing ideas and the budget for each channel. Will the revenue model be B2B or B2C, Freemium? Will there be different price points? Subscriptions? What’s the lifecycle of your product or service? Will you offer discounts? When and who will you offer them to? Ask every question of your business imaginable, then seek out a mentor and get them to ask you even more.
- Analyse your assumptions and test them: Now that you’ve built things from the ground up, you can take a top-down testing view. Ask questions about your business, such as how big the market is for your product or service, is it growing or declining, who are your competitors and how much market share can you capture? Are you being reasonable with your answers? Why? Then start working in best- and worst-case scenarios, and start refining your model by testing and analysing it
The Federal Government also offers a handy business model template to help you on your way.
Still looking for an easy solution to your business finance needs? Modern accounting software platforms could be the problem solver you’re looking for. Platforms, such as QuickBooks Online, can help you organise your tax reporting requirements in a heartbeat.