It seems Canadian entrepreneurs have a lot to learn when it comes to financial management. According to Intuit’s 2014 Canadian Financial Literacy Quiz, four in 10 small business owners lack basic financial knowledge.
The good news is that at least some of them recognize the fact that they could use a little help. More than two-thirds of respondents believed they need to pay closer attention to their finances, and 47 percent admitted some basic financial training would help.
Even still, the results of the quiz are less than stellar.
The failure rate for small businesses in Canada is quite high. According to Statistics Canada, 15 percent of new Canadian businesses fail within the first year, and half close before year five, writes Intuit communications manager Matthew Kanas in an email. “We want to empower Canada’s small business owners, entrepreneurs, and startups by raising awareness of this issue and helping them achieve success and longevity in the marketplace.”
So what’s at the root of the problem? Michael Rosenberg, the founder of WPV Corp, a B2B company dealing in workplace health and safety compliance, was willing to offer some insight in an interview.
“The problem is that most small business owners are ‘technicians.’ They do something very well,” Rosenberg writes. “As an example, a person who makes very good pies opens a pie shop, but just because that person makes great pies doesn’t mean they have all of the tools, both financial and managerial, to run a business. It’s a different set of skills.”
According to the survey many entrepreneurs were not fully aware of their own financial struggles. While 93 percent of respondents believed they had either an average or advanced understanding on financial management, 39 percent of them failed the quiz. It shows a discrepancy between what Canadian entrepreneurs think they know, and what they actually know.
“I have to say that confirms what I have seen over and over again,” Rosenberg writes. “Most people don’t recognize their weaknesses which hinder them from getting help. They don’t have a reality check a lot of times.”
The Financial Literacy Quiz serves to be that wake-up call. Now that we know entrepreneurs need help with financial literacy, the next step is taking decisive action. There are a number of ways to achieve financial savviness, and Kanas provided some tips for today’s small business owners.
It helps to have a financial adviser on hand to help ensure you’re making the right decisions. It will, of course, cost money to employ their expert services, but just think of it as a cost of doing business and an investment that will pay for itself in the long run.
There are also a number of technological tools out there that entrepreneurs should look at. With tools such as online banking, cloud-based document storage, and financial management software, it’s possible to manage your business from just about anywhere as long as you have a computer with a working Net connection.
Last of all, entrepreneurs need to become financially literate. Financial competence just means being more money-conscious and making wise decisions with your finances. Financial management software can help identify strengths and weakness allowing you to suss out opportunities for growth, and also give you the big picture of the money coming in and out of your business. Workday, SAP, Netsuite, and Epicor, are some of top programs on the market today. Using them effectively would go a long way in helping Canadian entrepreneurs on their journey to success.
Photo via Flickr, Creative Commons