Small businesses in the SOHO (small office/home office) category are very dependent on the skills and knowledge of their owners. Financial literacy is important because it gives business owners the tools to manage their organizations effectively. The ability to balance your personal checkbook does not make you financially literate enough to run a small business.
Don’t jump at the first lender willing to write you a check, no matter how tempting. Compare terms, interest and fees from multiple lenders. Don’t assume you won’t qualify for the best rate; you never know unless you apply.
Financial literacy means understanding yourself and what others know about you. Budgeting is the first step toward financial literacy. At the end of every month, compare your actual spending to your written small business budget.
Small businesses can have dramatic swings in income and expense from month to month. A simple spreadsheet will do the job nicely. The built-in reports can help you get an overview of what’s going where.
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