By Robert Stitt
You don’t have to read many sports pages before you can compile a list of athletes who made millions of dollars during their careers and lost it all within a few years after leaving the game. These stories are far too common, and they represent much more than just poor spending habits or a lack of math skills, they demonstrate a lack of understanding about finance.
These stories are not limited to athletes, either. A large number of businesses fold in the first five years. Among the top reasons for their failure is mismanagement of their finances.. Many business owners have not taken classes to learn accounting. While being an accountant is not a requirement of business success, understanding how to keep records and manage the company’s finances is.
Small Business CEO reports that there are several common obstacles to business owners learning financial literacy. Let’s look at the top two.
- The primary reason business owners give for not learning money management skills is that they hate working with numbers and plan to hire somebody else to do the bookkeeping and taxes. If this does, in fact, happen, then the business just might make it. The problem is that many businesses don’t make the money they thought they would and don’t end up hiring the bookkeeper or tax attorney.
- The second reason is a lot like the first, and it has the same basic caveats. Many business owners feel they do not have the time to mess with the finances. They plan to have the money handled by professionals. Once again, the problems come when the professionals are not hired, or when those professionals are unscrupulous.
While numbers may not be your cup of tea, and you may not have a lot of time to review the books, you don’t want to be the last one to know your business is failing. On the other hand, if you are growing, you want to know what to do with the money to maximize your growth. In short, if you’re going to own a business, at least learn the basics of financial management prior to taking the entrepreneurial plunge.