Why financial literacy matters for small business owners
Like many small business owners, I didn’t have a business school education or other training when I started Happy Cork in 2019. Before creating my business, I studied fashion design and then went into real estate with my husband.
When we couldn’t find a new tenant for one of our buildings in Bedford-Stuyvesant, Brooklyn, we saw it as a perfect opportunity to create a much-needed space to celebrate Black-owned, minority-owned, and female-owned brands of wine and spirits.
A strong vision isn’t always enough for a business to thrive
As I started my business, I soon realized just how many challenges the millions of small business owners across the country face on a daily basis—and managing a business’s finances is just the tip of the iceberg.
With a patchwork of courses offered across the nation’s school systems, few business owners are fortunate enough to have learned personal finance skills in the classroom, let alone tips for managing their business. As the economy begins to recover, it’s time we discuss how a lack of financial literacy impacts small business owners.
I know all too well that there is no playbook for how to run a business. That’s why only about half of all small businesses succeed within the first five years of operation. However, efforts to better educate small business owners and entrepreneurs on how to manage their business’s finances could help improve that statistic.
While we had a strong vision for our business, there were many unexpected financial hurdles along the way. As a business that sells unique, minority-owned brands, we cannot purchase wines from the same distributors as other Brooklyn liquor stores. Rather, we have to rely on approximately 30 different distributors to stock our store with the largest collection of Black and minority-owned wines and spirits.
Technology came to our rescue
In the beginning, managing payments and invoices from dozens of different distributors was immensely challenging. If we were just one day late on payments, a distributor could refuse to sell us the wines our customers expect and demand.
Luckily, we found the free payments platform Melio, which streamlined our payments and invoicing processes, giving us confidence that all payments to distributors would be made on time and allowing us to focus more of our energy on growing the business.
My business is not alone. Thousands of small businesses across the country are turning to financial technology to help them with back-office responsibilities. Data shows that in the last two years, a majority of small businesses increased their technology spending.
Small business owners are often wary of adopting new technologies, especially if they have been operating the same way for decades. However, investing a small amount of time researching free financial tools can have a big payoff. In my case, I wish I had embraced financial technology sooner.
Amidst inflation, and supply chain bottlenecks, and with approximately 44% of U.S. small businesses operating on less than three months of cash reserves, I strongly urge small business owners to look into the available online tools and embrace the digitization of payments. Running a business has a tremendously steep learning curve, but there are free resources available to keep small businesses’ finances on the right track.
Leveling the playing field for small business owners
Financial literacy and financial technology literacy can play a critical role in leveling the playing field for small businesses and helping them compete in the global marketplace. I encourage small business owners to take advantage of the resources available, such as online courses and free financial technology services—and most importantly, not be afraid to ask for help. With a company’s finances under control, business owners can focus on what really matters: growing their business.
Sunshine Foss is a Melio customer and the owner of Happy Cork, a wine and spirits store in Brooklyn.
This article originally appeared in AMNY.