9 Essential Finance Skills Every Business Owner Should Have

One thing we hear often from our clients is that they didn’t learn accounting in medical school. This statement often comes while they’re expressing frustration with managing the finances for their naturopathic clinic. And they’re right. Medical school doesn’t teach doctors how to handle business finances, but luckily you don’t need advanced accounting skills to run a successful practice.

In this blog, we discuss the nine essential skills that every business owner needs to manage their books. Don’t worry, it’s nothing like “know your state tax code.” In fact, they’re all skills most doctors already have and just need to learn how to implement in their practice.

Why are Financial Skills Important? 

Before we start listing skills, it’s important to know why you need some essential skills in financial management. 

Help You Grow

Think of your business as a car that’s driving you to your destination (retirement, a certain income level, a growing practice, etc.). The car needs fuel to function properly and have the energy it needs to move you forward. Money is that fuel. 

Cash maintains your business and helps you grow, which is why it’s important to know how much is coming in and going out. Your finances show you how much money you need to sustain your clinic, give you an idea of future expenses, and tell you when it’s time to add to your practice or take something away. It’s a bird’s-eye view of business health.

Help You Plan for Success

Finances can also help you plan for success. If you’re going to drive your car on vacation, then you would map out the most efficient route to minimize miles on your car and save gas. You can do the same thing with your business. When you’re planning significant growth, monitoring your expenses and profits can help you determine the most efficient way to reach your goals within a realistic time frame.

Help You Understand Data

Lastly, financial skills are important because your business’s numbers give you unbiased data about your performance. They can validate or correct your emotional interpretation of your success so you know exactly where you stand in reality. For example, you may feel like you’re struggling to make ends meet each month but when you look at your income, you’re making plenty of money to get by. These same reports can show you where you’re spending that money so you can make the necessary adjustments to have a little more breathing room each month.

Essential Financial Skills

1.) Functioning Knowledge of Excel

Every business owner should have a basic understanding of how Microsoft Excel works. Spreadsheets help you visualize your financial data, and Excel has many automatic functions that make calculations easy. It’s an essential tool for business owners because it allows you to lay out your data in a different format than within accounting software like Quickbooks, which makes it easier to spot anomalies.

2.) Understand Algebra

Basic math skills lend themselves to managing finances. Understanding the fundamentals of algebra, such as working with percentages or dividing fractions into whole numbers, will help you accurately calculate your finances. For example, you might have to figure out how much you owe in city taxes each quarter. This would require knowledge of how to find a percentage of total income. 

3.) Know Where Your Money Is Going

Tracking business expenses is key to monitoring your overall financial health. In the example we mentioned earlier, a doctor felt they were struggling but their income showed they had enough money to pay the bills each month. This feeling can come when you aren’t tracking business expenditures. You might spend too much money on little things or unnecessary items before your big ticket items are taken care of. This can cause financial strain that’s easily avoided if you simply track your spending.

4.) Know What Your Numbers Mean

If you’re not sure what your numbers are telling you, then they won’t be much help. You need to make sure you understand that your financial data is a reflection of your business. Interpreting those numbers correctly is important to understand your financial health. 

Monitor your revenue versus your expenditures to see if you are bringing in enough to pay the bills. If you have a deficit here, the numbers are telling you it’s time to cut back on some expenses. If you have a surplus, it means you can invest more in your business.

5.) Consistently Report Data

Consistency is key when it comes to your finances. Make sure you’re regularly reported expenditures and income so you always have an accurate picture of your business. Without consistent data, you won’t be able to accurately track your progress or make informed decisions about your finances.

You also want to make sure the way you report your data is consistent. For example, you always enter the same information in the same format in the field. This helps when it comes time to reconcile books or analyze performance because you know each field represents the same information for each entry.

6.) Consistently Review Data

Don’t let all that reporting go to waste, though. You should also be consistently reviewing your financial data. This is like taking the vital signs of your business to see if everything is in good order. It helps you catch problems early and avoid major issues down the road. Think of reviewing your clinic’s books as a monthly wellness visit to make sure everything is still in peak health.

7.) Forecast

It’s not enough just to know where you are. You also need to know where you’re going. Forecasting can help you project where your business will be in the future and helps you see if you’re traveling the path you want to be on. Your current performance and financial history will show how fast your clinic is growing and give you insight about what changes you need to make to reach your goals. 

8.) Budget

One of the most important financial skills is budgeting. A good budget ensures you know where your money is going and allows you to allocate funds exactly where you need them. At Every Single Bean, we teach budgeting a little differently than you might be used to because we use the Profit First approach. With Profit First, you pay yourself first and use the remaining money as your operating budget. It creates a realistic monthly budget so you never have to sacrifice your own paycheck.

9.) Measure Progress

You have to measure your progress to know if your clinic is growing. To do this, you need to establish some key metrics that indicate success. It might be monthly income, total expenses, or number of patients. These are all things that you can track and compare against previous data to see if you’re moving toward your goal. 

How to Master These Skills

Odds are you feel confident in some of these skills and not so confident in others. That’s okay! There are plenty of things you can do to bring these skills to your business, such as:

1. Practice. The more you exercise these skills the easier they’ll become. Each month, quarter, and year, you’ll get better and it’ll get easier to effectively manage your clinic’s finances. Just remember that consistent practice is key to perfecting a new skill.
2. Look forward. It’s easy to get caught up in where you’ve been or where you are now, but looking forward is an important part of developing your financial savvy. If you can figure out where you want to go, then it’s easier to look at your numbers in context and measure your progress.
3. Get help. Keep in mind that you don’t have to manage your finances alone. Hiring a professional brings mastery to your practice immediately and saves you time and energy that could go back into your practice. Every Single Bean specializes in helping naturopathic clinics better manage their finances so they can better serve their patients.

Find Your Financial Partner at Every Single Bean

Developing financial skills is essential to running a thriving business, but many doctors don’t have the time to dedicate to balancing books. Instead of taking attention from your patients to focus on financials, let us take care of the book end of your business. Schedule a call with us today to see how we can help you succeed.