DO YOU HAVE FINANCIAL INTELLIGENCE?

Have you seen a Cash Flow Statement? Do you know what an Income Statement is? Can you
read a Balance Sheet? Well, as an entrepreneur you need to understand the message that each
of these simple reports convey.
A Cash Flow statement provides a picture of the movement of real cash into and out of your
business.
A companys financial performance over a period of time is depicted in the Income statement.
The period may be a year, a quarter or a month.
The Balance sheet is an account of the assets and liabilities of your company at a particular
point in time.
Daymond John once said -Im a big advocate of financial intelligence.Yes, what you need is to
acquire financial intelligence. However, I am not suggesting that you learn accounting or go
through a course on Accounting for Dummies.

Correct me if I am wrong -Your aim is to run your startup more effectively, right? To achieve
this singular goal you will need to know enough about finance to be able to talk sense with
financiers, with statutory authorities and with business partners and suppliers. Too many
startups have crashed because none of the co-founders understood finance and its
implications.

Like a picture describes a scene more eloquently than a battery of words, numbers describe a
business more accurately than any other form of communication. The first and foremost action
you need to take is to remove any fear or self-doubt with respect to financial terms and reports.
The rows and rows of numbers can make financial reports appear intimidating and mystifying. I
do not think it will be any different if you were to learn a new language.
To succeed in your business you need to understand the business language of finance. You
should be familiar with some of the financial terms, you should know how the data is collected
and how to interpret the different financial reports. You can employ CAs and other finance
professionals to prepare your financial records. But it is you who will have to understand the
picture drawn by the reports and take decisions based on your interpretation.
Financial issues rank second in causes for startup failures. Out of 20 failed startups that were
interviewed, around 7 listed financial issues as one of the reasons for their failure. The reasons
giving were raising capital, cash flow, pricing, break-even estimations, currency fluctuations and
raising cost of resources.
If you dont know your numbers, you dont know your business period.
YourStory, had published an article in 2014 (the link to the article is mentioned in the
references), where they have shared stories of twenty failed startups. These stories are
narrated by the founders themselves giving their interpretation of how and why the startup
failed. Here are some of the stories.
You may not have heard of Dazo, a small food technology firm. Dazo had to shut down within a
year of launching. According to Shashaank Singhal, former CEO of Dazo: -We were scaling up
and were looking to get into more cities, but were short on capital. At some point we felt we
were lagging behind other players and decided to quit.
According to reliable sources, food-tech start-up TinyOwl Technology Pvt. Ltd faced delays in
closing its next round of funding. This resulted in a round of job cuts and expansion plans had to
be put on the back-burner.
DoneByNone was a web-only womens fashion brand operating out of Gurgaon. They also faced
challenges in raising further capital, prompting the co-founders to quit and take up regular jobs.
They were in competition with startups like Zovi and YepMe.

In 2013, after three years of running, Flud, the social news reader for iOS, Android and
Windows Phone, had to fold up as it ran out of money. Flud was doing very well and had raised
$2.1 million in the seed stage. They were in the process of raising another $8 million when they
closed shop. This goes to show that even well established startups can be hit by financial issues.
SchoolGennie was a startup that created an enterprise resource planning (ERP) tool for schools
to enable them to manage everything from fees, inventory, communication with parents, and
so on. After 11 months they had to pack-up without having sold even one license. Inadequate
financial planning was one of the reasons which ultimately led to cash flow issues.
Imagine the world of mobile based on Nokia and Motorola if Apple had not been restarted by a
missionary entrepreneur named Steve Jobs who cared more for his vision than being tactical
and financial. Vinod Khosla
Most cant emulate Steve Jobs who could ignore being tactical and financial and focus on his
vision. You need to give due respect to the financial health of your startup if you want to avoid
the pitfalls that trapped the failed startups. Why give failure a chance to catch you on the
wrong foot? Along with being technically savvy, be financially intelligent and be one step ahead
of the rest.

Read more https://www.wfnen.org/blogs/

Source - https://www.wfnen.org/

ABOUT THE AUTHOR

Chanchal Das Gupta

Educationist
Chanchal is an Educationist with rich experience in training and instructional design. He has also
spent time in software programming, customer support activities and quality process
development. Outside his working schedule, Chanchal enjoys reading and his love of nature
draws him into driving around whenever circumstances permit. He enjoys music, particularly
the instrumental kind, although the only instrument that he plays is the record player.