There isn’t a single template for success in business that entrepreneurs can follow, as each person’s and organization’s path is different. However, this doesn’t mean there aren’t also issues that are true for all business owners.
No matter what products or services you sell or where you live, be aware of common mistakes entrepreneurs make that cost them big time.
Here’s the lowdown on what you need to avoid today, to ensure your beloved business not only survives but thrives.
4 Financial Blunders Small Business Owners Should Avoid
1# Failing to Track and Manage Finances Effectively
One of the biggest mistakes entrepreneurs make is failing to keep a close eye on their company’s finances.
When you’re running a business, look at cash flow regularly, as it’s one of the key indicators of the health of an organization. Having too little cash available will affect survival short-term and long-term, as it means you likely can’t pay your bills.
Entrepreneurs must be able to read relevant numbers and reports every week, including things like income statements, balance sheets, and profit and loss reports.
Knowing this information will help you spot problems sooner and take steps to stop issues becoming bigger, unsurmountable ones. It will also assist you with timely decision making for your venture.
Always keep a close eye on spending so you don’t outlay more cash than you’re bringing in. Many people think they only need to know about the big monthly expenses in their business, but smaller ones can add up very quickly and must also be watched like a hawk.
It pays to utilize effective business spend management platforms so you can quickly and easily see where your business is at, and how it’s performing compared to other, similar organizations.
The sooner you pick up on things you’re outlaying cash for unnecessarily, for instance, the sooner you can cut costs and keep your finances on track.
2# Not Saving for Lean Times
Another big issue for many business owners is that they don’t save enough money from their venture to cover payments in lean times.
It’s impossible to know when a challenge might be around the corner. Your business may face dramatically fewer sales overnight or hit a slow period more gradually.
Either way, during these times, it’s essential to have enough savings to keep trading and paying bills, so an emergency or downturn doesn’t mean you have to close up shop.
Many financial planners and other consultants recommend entrepreneurs have at least three months’ worth of expenses in a contingency fund.
3# Being Unaware of Tax Obligations
Handling and planning for tax responsibilities and related costs may be the least favorite job of many business managers, but it is still a necessary one.
Many entrepreneurs land themselves in hot water because they’re unaware of their tax and other accounting and financial obligations.
To protect yourself and your business and ensure you don’t have to fork out thousands of dollars to pay for fines or late fees or other expenses, submit all your paperwork on time, adhering to regulations.
Speak with your accountant and other advisors to get clear on what you must do and when, and always check paperwork and follow up with consultants to ensure tasks are completed and bills paid when they need to be.
It’s your responsibility to ensure your business does what it has to, so don’t just rely on outsourcing tasks to others.
4# Waiting Too Long to Obtain a Loan or Investment
As business owners, we often don’t want to deal with the stress and time commitments, not to mention financial costs, that come with getting a loan before it’s truly needed.
This means it’s common for entrepreneurs to put off investigating funding for their business until they really feel they need access to further cash.
The problem with doing this is that if you wait too long, you could find yourself in an emergency, needing additional cashflow ASAP, but unable to source the money in a hurry.
Alternatively, you may have to spend a lot more money to get the cash you need (via higher interest rates and approval fees, etc.), and this places more of a financial burden on your business.
Also, if you wait too long, you may miss out on taking part in great opportunities for your business, such as ramping up production for an unexpectedly busy period or investing in a key industry event.
It’s wise, therefore, to plan months ahead and make projections for your needs so you can take steps to get more investment before you need it.
Millions of businesses close their doors around the world each year because of financial issues. You don’t want to join their ranks, so be strategic and follow the tips mentioned above to keep your business running smoothly.
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Author: Anees Saddique