Finance can be one subject where people get confused or do not want to talk about it.
However, learning the ins and outs of finance will help you grow personally and professionally.
Most of us have to deal with personal finance issues on a day to day basis. From spending habits to credit cards, budgeting, and investing, it can be much information to take in all at once.
Skills within the personal finance field aren’t the only types of skills needed to succeed in life. There are many other skills to acquire for you to become well versed in life.
Some skills are practical, while others are more technical and require a bit more brainpower. Either way, you can learn anything if you put your mind to the task at hand.
Throughout the article, I will highlight the best financial skills to acquire in 2021. Some of the skills you may already be familiar with while others may not be.
Which Business & Financial Skills Will Set You Up for Success in 2021?
It is a question we all ponder when we grow wiser. The earlier you start learning financial skills, the better off you’ll be in your golden years.
Here are the top financial skills that will set you up for success.
1. Bookkeeping
Hold on just a minute! I know what you’re thinking about. “oh my gosh, bookkeeping is so boring. There is no way I can learn this skill. I am too impatient!”
Yet, bookkeeping is the most crucial skill to learn if you are an up and coming entrepreneur. Even when you work on your financial statements, you are using bookkeeping skills.
Why is bookkeeping so important? For starters, if you run your own business and rather not pay for an accountant, it is crucial.
Keeping track of your cost of sales, also known as the cost of goods sold, operating expenses, depreciation, and amortization, is something that must be done every month.
When it comes to sitting down to do your taxes, you can hire an accountant to figure out what form is needed (1120 S, K-1, etc.).
The best software to keep all of your financials in order is Quickbooks Online. Usually called the powerhouse of bookkeeping and accounting, Quickbooks enables you to link up your bank accounts, classify transactions, and create financial reports.
Check out the learning resources on the Quickbooks Online site.
2. Taxes
Learning to complete your taxes is a worthwhile investment in yourself. If you can learn how to complete your 1040 at the federal and state levels (except Florida), you are ahead of the game.
If you are a small business soon, you can learn about the different tax forms, business entities, and deductions.
What are the business structures when starting a small business?
• Limited Liability Corporation or LLC
• S -Corporation
• C- Corporation
• Sole proprietorship
• Partnerships
The tax forms that go with each structure are different. For example, if you set up as a C -Corp, you would need to fill out the 1120 form. If you have been established as a sole proprietor, you will have to fill out a schedule C form majority of the time.
3. Financial Statement Modeling & Business Valuation
Learning how to forecast your financial statements is an essential skill when you are in business. You may think of financial modeling when analyzing a company’s fundamentals when before you invest. However, many small businesses can forecast cash flows a couple of months and years out, depending on your business model.
Financial modeling involves a heavy eye for detail. If you are familiar with basic accounting, you have out beaten the competition. Knowing how the three financial statements are interconnected is another sub-skill involved with financial modeling.
For example, say if I ran a small manufacturing business. I have the income statement, balance sheet, and cash flow statement on my computer screen. I first have to figure out the growth rate of revenue based on past historical trends.
Long story short, going down each line item from operating expenses to net operating profit after taxes can be modeled out.
Next comes business valuation, where you value your company based on a terminal growth rate or a rate at which your company will grow indefinitely.
What are the most prominent business valuation methods?
• The discounted cash flow model
• Market-Based valuation method
• Capitalization of cash flow method
4. Leadership & Management Skills
Although not a financial skill, it still ties into running a small business, which will help the financials run smoothly. Becoming a leader will help you effectively manage people on your team. Every small business has a team that needs to be addressed.
How do leadership and management coincide with financial skills? Say I manage a sales team that needs to hit quotes each month.
If I am the CEO or manager, I also work side-by-side with the chief financial officer or a financial analyst team. Those analysts and the CFO need a report each month about revenue estimates, and they need those numbers to forecast how well the company will perform going forward.
An outstanding leadership and management team will ensure the successful morale of the group. What makes someone a great leader and or manager?
• Boosting team strengths rather than trying to build up weaknesses
• Engage in fun activities after work
• Make the team feel valued and supported
• Monthly performance reviews with constructive criticism
Of course, more skills make up a great leader and manager, but these are just a few overall necessary leadership skillsets.
Conclusion
Some skills you may find boring, and your mind may be feeding you lies, saying you are too lazy to learn each of the skills mentioned.
However, if you can at least grasp the gist of or learn just a little bit of each skill, you are setting yourself apart from 99.9% of people who run their own business.
You can even implement these skills into your personal financial life or add these skillsets to your tool kit as a learning experience.
Who knows, maybe one day you’ll develop into a high-powered leader who needs to dip their toe into each business and finance skill!
