Are You Financially Fit to Run a Business?

February 20, 2024
6
minutes to read
by
Justin Bohlmann
Table of Contents

As a small business owner, you wear many hats. You manage employees, provide customer service, and keep your business profitable. But do you have the financial knowledge to run a business successfully? In this blog post, we'll explore the fundamental financial knowledge you'll need when starting a business and how Thriday can help you manage your finances.

Key Industries for Small Business 

There are many industries where people could start a small business. Some of the most popular industries include retail, food, and professional services. Retail businesses include stores that sell goods to customers, such as clothing, electronics, and home goods. Food service businesses include restaurants, cafes, and food trucks. Professional services businesses include consulting firms, marketing agencies, and law firms.  

Considerations When Starting a Business

Starting a business requires careful planning and consideration. Before you start your business, you should ask yourself the following questions: 

  • What is my business idea? 
  • Who is my target market? 
  • What is my budget? 
  • What are my startup costs? 
  • What are my ongoing expenses? 
  • What is my revenue model? 
  • What are my marketing strategies? 
  • What are my legal requirements? 
  • What are my tax obligations?

Knowing the Numbers: What Financial Metrics You Should Know

Before starting a small business in Australia, here are some foundational financial metrics and knowledge areas that a business owner should have:

  1. Profit and Loss Statement (P&L): Understand how to create and interpret a P&L statement, which summarises revenue, expenses, and profitability over a specific period.
  2. Cash Flow Management: Learn how to effectively manage cash inflows and outflows to ensure the business has enough liquidity to meet its obligations.
  3. Budgeting and Forecasting: Develop skills in creating budgets and financial forecasts to estimate future revenue, expenses, and cash flows.
  4. Pricing and Cost Analysis: Understand how to determine appropriate pricing for products or services by considering production costs, market demand, and competition.
  5. Break-Even Analysis: Learn how to calculate the point at which revenue equals total costs to determine the minimum sales volume required to cover expenses.
  6. Understanding Taxation: Familiarise yourself with Australian tax obligations for businesses, including goods and services tax (GST), income tax, and payroll tax.
  7. Record-Keeping and Compliance: Learn about bookkeeping practices and legal requirements for maintaining financial records, including invoices, receipts, and financial statements.
  8. Financing Options: Explore different financing options available to small businesses, such as bank loans, grants, and venture capital, and understand their associated terms and conditions.
  9. Business Insurance: Understand the importance of various insurance types, such as public liability, professional indemnity, and worker's compensation, to protect your business against potential risks.
  10. Compliance with Legal and Regulatory Requirements: Familiarise yourself with local laws and regulations related to business operations, licenses, permits, employment, and workplace safety.

Tax, Accounting, and Bookkeeping 

Managing your finances is one of the most important aspects of running a business. This includes tax, accounting, and bookkeeping. As a business owner, you are responsible for keeping accurate financial records, paying taxes on time, and managing your cash flow. 

Thriday is an automated accounting software that can help you manage your finances more efficiently. Thriday provides a range of features to help you simplify your financial management, including bank reconciliation, expense tracking, invoicing, financial reporting, and tax compliance. These features make it easy to stay on top of your finances and focus on growing your business. 

Financial Knowledge Quiz

Taking a financial knowledge quiz for business owners can be a valuable self-assessment tool, helping entrepreneurs identify areas of strength and areas that require further understanding. By evaluating their financial knowledge, business owners can pinpoint areas for improvement and take proactive steps to enhance their financial literacy, ultimately empowering them to make more informed and strategic decisions for their small business. Take the Thriday financial knowledge quiz to see where you stand now.

Key Takeaways  

Running a business requires a lot of hard work and dedication. To succeed, you need the right financial knowledge and tools to manage your finances effectively. By considering the critical industries for small businesses and using Thriday for your financial management, you can ensure your business is on the path to success.

DISCLAIMER: Team Thrive Pty Ltd ABN 15 637 676 496 (Thriday) is an authorised representative (No.1297601) of Regional Australia Bank ABN 21 087 650 360  AFSL 241167 (Regional Australia Bank).  Regional Australia Bank is the issuer of the transaction account and debit card available through Thriday. Any information provided by Thriday is general in nature and does not take into account your personal situation. You should consider whether Thriday is appropriate for you.

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