Small businesses need accessible nancial literacy education

BY PRASHANT GANDHI

Despite a fragile economy and the risk of a recession, entrepreneurship has soared in New York state in the past three years. In fact, the U.S. Chamber of Commerce reported nearly 30% more new business applications led in 2022 than in 2019. A sobering reality exists, however.

labor shortages and record-high in ation.

While current economic headwinds are challenging enough to navigate, one thing business owners can control is their nancial literacy, which can play a crucial role in their business’s health. It is time that the private and public sector come together to ensure the longterm success of New York’s small businesses by makingnancial literacy education more accessible.

while the zoning bene ts appear great on paper, building large retail spaces subject to city agency approval is likely more risk than many are willing to take on. A positive step would be to give developers incentives not just for supermarket-type operations, but also for healthy fast-casual eateries as well. After all, the way the world is trending, people nowadays are getting their share of nutritious lunches and dinners from the Sweetgreens and Dig Inns of the world.

Food deserts would bene t tremendously from a spur of healthy and convenient restaurants, and if they could be considered for an even-further-upgraded version of the FRESH program, then a greater pool of prospective tenants would render more developers likely to take advantage of it. ■

Sam Eshagho is founder and managing principal of West Egg Development.

Despite a thriving entrepreneurial spirit in the Empire State, many businesses are set to fail. Approximately 20% of small businesses shut down within the rst year— and by the fth year 50% are no longer in business, according to the Bureau of Labor Statistics. is failure rate has only been compounded recently by supply-chain issues,

Financial literacy is critical to the sustainability of small businesses, as it helps owners understand how money moves through their business, meet nancial commitments to both suppliers and employees and make prudent choices for their business backed by nancial knowledge. Often when small businesses experience nancial hardship, it is because they are not keeping track of their nancial statements and have a limited understanding of what they mean for their business as a whole.

While many small-business owners are not nance experts or accountants, there are some existing programs and resources to help New York small-business owners manage their nances. ey include the New York State Small Business Guide, the New York Small Business Development Center, the SCORE’s mentoring program and the Small Business Administration’s Financial Management for Small Businesses Workbook. But there is still a great need for public and private investment in accessible nancial literacy education.

Quality is as important as accessibility when it comes to these resources. Financial literacy education should follow the “3-5-7” imperative to ensure that business owners have a broad understanding of their pro ts, debts and cash ow. All programming should teach entrepreneurs to master three basic nancial statements: pro t and loss statements, cash ow statements and balance sheets.

It should also teach them how to calculate and use ve basic nancial ratios: gross pro t ratio, current ratio, days in accounts receivable, days in accounts payable and net pro t margins.

Finally, entrepreneurs could bene t from education on how to improve their cash ow by following seven core habits: using cash discounts with suppliers and vendors, minimizing discrepancies within expenses, setting in place review and approval processes for invoices, adopting payment ows that are easy and frictionless, digitizing order processes, ensuring that payments from customers match invoices and building automated collection routines.

Comprehensive nancial literacy education can level the playing eld for New York small businesses and help them compete against larger companies in the marketplace. Resources and a ordable programs that teach the fundamentals of nancial literacy, including how to manage everyday nances, mitigate potential risks and optimize for the future, have never been more important.

To defy the concerning failure rates of new businesses and strengthen New York’s economy, the state’s small-business owners need better nancial literacy education. ■

Prashant Gandhi is chief business o cer of Melio, a business-tobusiness payments company for small businesses headquartered in New York.