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5 Key financial essentials you can learn with online courses

BY: SGI|30 July 2019
BLOG| Business leadership and strategy

What do FedEx, Amazon, and Tesla all have in common? According to Inc., all three of these reputable companies didn’t make a profit in their first five years. But, how do you know when it’s time to throw in the towel and when you should stick with your company and wait out the few years before it makes money? You can determine this with a thorough financial analysis of the company because – as most organisations know – finance is the language of business.

 

Whether you’re the owner of a small business or the senior manager of a division within a larger company, knowing how to “crunch the numbers” is essential to understanding the viability of a department or organisation. Luckily, this is something you can learn with the right online courses. If you’ve never ventured into finances before, make sure your analysis consists of these five areas.

 

1. REVENUES

Investopedia defines revenue as “the amount of money that a company actually receives during a specific period … calculated by multiplying the price at which goods or services are sold by the number of units or amount sold”. And, while it’s a good idea to track how much money is coming into your business, tracking what’s coming in is only one component. You also need to ensure that you track the growth of revenue over a set period, the concentration of revenue (i.e. where your money is coming from and that this is not your only source of income), and revenue per employee to help measure productivity and ensure that you aren’t overspending on staff.

 

2. PROFITS

While revenue refers to the money that comes in, only a percentage of this is your profits. Both The Balance Small Business and Brian Tracy offer a number of ways for you to increase your profits by implementing small changes. These include changing operational procedures such as reducing your expenses, maximising your cash flow by signing clients on for retainers and ongoing payment plans, providing all your employees with the correct knowledge and tools to sell your product or service (regardless of their role in the company, and marketing your business effectively.

 

3. OPERATIONAL EFFICIENCY

In addition to increasing your profits, changing your operational model to one that’s efficient will also help your organisation grow. One way of doing this is to measure how well you’re using the company’s resources and cutting costs in every part of the business. Entrepreneur suggests that you also look at the way your business is structured for liability and taxes – for example, do you really need to be incorporated if you’re self-employed with one other employee? Additionally, you should take advantage of tax deductions. If you’re unsure of what types of tax benefits your business can receive, invest in the future of your organisation by consulting a tax professional.

 

4. CAPITAL EFFICIENCY AND SOLVENCY

Capital efficiency sounds scary, but according to Business Dictionary, it indicates the relationship between your expenses and how much you’re using to provide a service or product. According to The Business Journals, VeevaSystems ran lean for many years in order to achieve its goal. How? By building its product based on another platform, so it could focus on its core business. By ensuring your capital is working for you, you’re also ensuring that your organisation is solvent (i.e. able to meet its financial obligations).

 

5. LIQUIDITY

If you’re able to meet your company’s financial obligations, you should also measure its liquidity. Kashoo defines liquidity as a measure of your company’s ability to cover its immediate and short-term debts and obligations using your assets. Assets can apply to cash at hand, cash in an account, and anything that can easily be converted to cash.

 

Now that you’re prepared to jump into financial analysis, register for our online microlearning Crunch the Numbers (Financial Analysis) course. It will equip you with the knowledge of financial analyses within a business operation and help you identify growth opportunities through financial results. Additionally, you will receive credits towards our online Managing Finances short course, which covers financial analysis, risk management and managing a unit’s finances.

 

Are you keen to put these steps into action? Register for one of our online financial courses and download our Financial Management e-book here for an comprehensive look at financial risk management.

 

 

Crunch the right numbers, Financial Analysis

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