Important Read On The Value Of Financial Literacy In Business
Important read on the value of financial literacy in business. Financial literacy is the understanding of financial terminology, statements, and concepts, and knowing how to use this information to make a financial impact.
Moreover, being financially literate means having general knowledge of the fiscal and economic landscape of business. This includes standard business terms like profit, balance sheet, and cost of goods sold, as well as understanding what drives these numbers and the implications they may have for business operations. After all running a business is for the purpose of making profit at the end of the day, as such it is imperative to be financially literate for a smooth business journey.
A lack of financial literacy affects people in developed or advanced economies, as well as those who live in emerging or developing countries. Botswana is classified as a developing economy. Consumers in advanced economies also fail to demonstrate a strong grasp of financial principles that can help them understand and negotiate the financial landscape, manage financial risks effectively, and avoid financial pitfalls. The level of financial literacy may vary with education and income levels, but evidence shows that highly educated consumers with high incomes can be just as ignorant about financial issues as less-educated, lower-income consumers (though, in general, the latter do tend to be less financially literate).
How can Financial Literacy Help You In Business?
1. Understand the Impact of Your Actions
Once you understand your company’s financial statements, you can track specific items that impact your organization’s bottom line. When applied to your daily responsibilities, insights into your company’s financial accounting can be a motivating factor for you and your team. Knowing the impact your actions have on the broader organization’s financial health can help you keep the big picture in mind.
2. Make More Informed Decisions
If you’re a manager, financial literacy can allow you to approach problems with a new toolkit. When faced with a difficult business decision, you can confidently consider the financial implications before weighing your options and making the best choice for your team and organization. Financial literacy can enable you to become a well-rounded leader who considers multiple facets of any issues that arise.
3. Advocate for Your Team’s Budget
When your team is in need of money for a project or product, your understanding of finance can help you build a strong case. For instance, if your team is requesting funding for project management software, you could calculate the anticipated return on investment based on how much more efficiently the software could enable your team to work. Proving the impact on your company’s bottom line will make your case more compelling.
4. Hone Your Negotiation Skills
Financial literacy can help you thrive at the negotiation table. Whether you’re negotiating salary, benefits, or the scope of a project, having an understanding of the bigger financial picture can serve you well. If the matter of negotiation will impact the financial well-being of the organization, understanding how to talk about the financial implications of your desired outcome could sway the conversation in your favor.
5. Become Financially Efficient
Understanding how each of your team’s expenses plays into the liabilities on your organization’s balance sheet can allow you to assess how to be more financially efficient. Maybe there’s a service your team previously subscribed to and no longer uses, or perhaps you can find a free version of a tool your team has been paying for. When you’re aware of how each expense factors into the balance sheet, it can be easier to identify ways to be more cost-effective.
