Are you self-employed? Do you know what makes a self-employed person financially capable? A study titled ‘Financial education for entrepreneurs’ (ACCA – 2014) concludes that a self-employed business owner to be financially capable must be able to:
- Distinguish between personal and business finances.
- Be a competent buyer of financial services – understanding financial products, their costs and risks, and selecting what is suitable for the business.
- Anticipate the business’s future financial needs under alternative scenarios.
- Assess the risks to which the business is exposed and prepare appropriate responses.
- Understand the decision-making process of finance providers, and thus appreciate how the business can become creditworthy or investment-ready.
- Relate the business’s financial needs to a country’s regulatory and fiscal framework – to appreciate the notions of regulatory and tax efficiency.
- Exercise financial management, that is, to use financial information to analyse business performance and create policies and controls that optimise this.
The study further adds that the following financial capability skills should be transferable to a self-employed business person:
- Monitoring expenses which includes the ability to keep up to date, in a rigorous manner, on what one has spent and how much one has available to spend.
- Budgeting which includes the ability to plan one’s spending frequently and accurately as well as to adhere to one’s spending plans.
- Living within one’s means includes the ability to avoid needing credit in the short-term owing to overspending, to borrow only within affordable levels and not to require credit for buying food or repaying debts.