Many businesses fail, not because they have poor quality products or poor marketing strategy. Sometimes the problem lies with mishandling of financial resources. Here are some common mistakes to avoid when managing your business money:
- Hiring and buying more equipment before having the actual profit.
There is a great difference between having your revenue stashed in your bank account and being close to having it. Do not incur more liabilities when you don’t have the actual amount of money in your hand. You must overcome hiring too many employees on an impulse because of over-optimism before the revenue is real.
- Having too many overhead.
Direct employees bring in profits, innovate, or share their expertise on customer service. All of these employees are paid because they help the company directly. The cost of having overhead must be evaluated if they really bring in money to the company or produce anything directly. Otherwise, they would become the company’s liability.
- Fund confusion.
Your personal budget or monthly allowance should not be mixed with your business funds. Otherwise, one of these will be at the expense of the other. You must have separate accounts for money that you spend on your family and the money that you use in business.
- Neglecting your tax obligations.
Not paying taxes is not a good strategy when you are trying to save some money on your business. The more you ignore your tax obligations, the more it piles up including your penalties. Avoid this mistake to avoid the hassle of being investigated by the Internal Revenue officer and being sued of tax evasion. A smart entrepreneur is updated with their schedule of tax payment monthly, quarterly, and annually.
- Being lost on where the money from your business account is going.
You’re an entrepreneur, but your accounting skills aren’t that good enough. You might have recurring expenses that you don’t understand or you’ve completely forgotten about. It may be that you are spending for things that aren’t worth your money. You’ll need to review your expenses regularly. It may be weekly, monthly, and quarterly in order to understand the flow of money in and out of your business. You can also try to hire a bookkeeper to help you with it.
- Not having enough reserved funds.
As an entrepreneur, you should understand that a steady income from will take a few months and the same goes with making a profit. So when it comes to managing your business finances, you should consider having enough source of money to keep the business running for a few months before withdrawing the capital.
- Too late to seek help.
Many newbie entrepreneurs thought that having a bookkeeper is just a waste of money. But when you neglect it, you’ll be losing the chance of securing the financial aspect of your business. You will save a lot and be able to cut down the expenses when you seek for a financial expert from the beginning rather than hiring someone to fix when you don’t have any idea where your budget goes and the business is starting to fall apart.
These are some common mistakes when it comes to the financial aspect of a business. So, invest in your product, invest in your marketing strategy and be wise in handling the finances to ensure more success in your business.
