An OECD report showed a very high correlation between financial knowledge and success in wealth creation – in summary, the less you know about managing money the more likely one is to go broke! Even more disturbing, are several recent studies where, countries with apparent high levels of wealth have ‘forgotten’ the basics of Financial Management, and budgeting and money management levels are falling.
Financial literacy is a combination of financial knowledge, skills, attitudes and behaviours necessary to make sound financial decisions, based on personal circumstances, to improve financial wellbeing. – see further at page 12 – OECD
Aussie research found that only about half of Australians set a budget, what’s more only 38 per cent budget for leisure activities and these stats are also mirrored in the US, Ireland, Norway, Peru, Czech Republic and the UK.
So running your business – Four ways to send your business broke –
- Have no plan: No business plan, marketing plan, nor understanding of your competition, customer needs, or even your business needs – no big picture/strategic direction is sighted by insolvency administrators as the number one reason businesses go broke;
- Take Credit as your Friend: Always offer credit to your customers and then ignore debt collection processes (and don’t charge interest on overdue accounts), and start with insufficient seed-money. Don’t analyse cash flow – high cash use was the second highest cause of business insolvency;
- Think nothing about spending: Increase your stores of stock (especially stock that can’t be sold), spend up big on office or shop fit-outs, the very latest in software and equipment, and employ too many staff;
- Guess your prices to charge: To speed up going broke don’t ever think about how you set prices, simply ‘price everything to sell’ irrespective of what it costs to produce and deliver in your business.
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