Financial Literacy for Small Business Owners, Freelancers and Startups

Updated: October 16, 2024

Original Published Date: January 28, 2021

Live Twitter #StartupChats

Q&A with Startup Canada Guest Advisor Christine Whone

In this edition of Startup Canada’s #StartupChats, we discussed Getting up to Speed on Financial Literacy.

What’s the value of financial literacy for small businesses, freelance, and startup businesses? Learn what you need to know to make informed and effective financial decisions and how to apply them to your business. Learn from an advisor about this important topic for startup business owners, freelancers and entrepreneurs to realize the real value of their financial literacy needs.

Q1 What is financial literacy and why is it important?

A1 Financial literacy is knowledge of money management, specifically in this context, for your business success. Your business success of course is connected to your personal finances and anyone you work with.

Knowing budgeting & decisions around managing money is essential to operate a business. It involves taking action in bookkeeping, accounting, taxes (sales tax, personal, corporate) payroll, loans, investment, and understanding what cash flow means to grow money.

Q2 Why does being financially literate matter for new business owners and entrepreneurs?

A2 It matters because you will know how to manage payments of operational costs to run your business. It’s important to understand the power of tax, sales tax, purchasing, investment, and loans to manage your cash flow to operate advantageously.

Q3 What are the first things to think about when building a financially fit business?

A3 First, focus on earning a profit. Make a financial plan with realistic but eager goals, and know your break-even numbers. When you have profit, determine how to reinvest it in your business growth. Activate patience and determination.

Stop the bleeding of money, fast. Kill services and expensive software costs if there’s no return or benefit in using them. Be conservative with your spending habits as you learn how to manage your profits.

Q4 How does increasing financial literacy make business owners and entrepreneurs more effective?

A4 Keeps you in operation and living the #entrepreneurial dream! It fulfills the specified function (profit) which will earn you acknowledgment from the market and possible interest from investors to advance and grow.

Q5 What financial literacy principles should you know when starting a business?

A5 Know and forecast all operational costs. Make a budget. Look at it regularly, and use bookkeeping software. Know your break-even numbers. Be a conservative spender when starting.

Q6 What are some of the biggest financial mistakes entrepreneurs make when starting up?

A6 Leveraging high-interest loans to spend (invest) on operational needs. Build lean. Earn profit first, then invest.

Q7 What resources, tools or technology do you recommend to help you manage business finances?

A7 Use Quickbooks Online. And get training on Quickbooks. I know some amazing QBO Online Trainers in the Greater Toronto Area (who can train remotely) if you'd like an intro.

Q8 Where can entrepreneurs start to find financial training and support?

A8 Find and work with a qualified accountant and/or bookkeeper. One you can build rapport with, and someone you trust. This should be someone willing to take time with you to educate you on your business and finances.

Q9 What are the top three symptoms entrepreneurs will experience that indicate they need to brush up on their financial literacy?

A9 They aren't aware of monthly sales numbers, cost of operations (expenses), or details on account receivables.

Q10 How do you know when to get help or support in managing your finances?

A10 When you’re not sure how to make the business grow further or see any financial gains. When it feels like a struggle to make it work, and you’re still passionate about it and believe the business can succeed.

Q11 What is your best piece of advice for #entrepreneurs building a financially fit new business venture?

A11 It’s okay to ask for financial help! Find someone who gives action-based feedback—answers and strategy. Someone who is compassionate and understanding of your unique business success goals to help you make a solid financial plan.