Do You Know What Your Financial Statements Are Telling You?

As a business owner, you need to be able to understand the language of your business finances, processes, and systems. This is essential for making informed decisions about your business, such as how to allocate resources, set prices, and track your progress.

Here are some of the key terms you need to know:

  • Financial statements: These are documents that provide a snapshot of your business’s financial health. They include the balance sheet, income statement, and cash flow statement.
  • Cost of goods sold (COGS): This is the direct cost of producing your products or services. It includes the cost of materials, labor, and overhead.
  • Gross profit: This is the difference between your revenue and COGS.
  • Operating expenses: These are the costs of running your business, such as rent, utilities, and salaries.
  • Net profit: This is the difference between your gross profit and operating expenses.
  • Processes: These are the steps involved in delivering your products or services to your customers.
  • Systems: These are the tools and technologies that you use to manage your business.

It’s not necessary for you to memorize all of these terms, but you should have a basic understanding of what they mean. You should also be able to read and interpret your financial statements.

If you don’t have a background in finance, you may want to hire a coach, bookkeeper or accountant to help you with this. We can help you set up your financial systems and track your finances on a regular basis.

By understanding the language of your business finances, processes, and systems, you’ll be better equipped to make informed decisions that will help your business succeed.

Here are some additional tips for business owners who want to improve their financial literacy:

  • Hire a coach who can work 1:1 with you to close the gap in a short amount of time.
  • Take a financial literacy course. There are many free and low-cost courses available online and in your community.
  • Read books and articles about business finances. There are many great resources available to help you learn about this topic.
  • Talk to other business owners. They can share their experiences and insights with you.

By taking the time to learn about your business finances and you’ll be well on your way to achieving your business goals.