When you are in business the whole idea is to make a profit. Without a profit your business will go down the tube. This will even happen sometimes when there is a profit if cash flow is not seen to. While most people who run a business – especially a small business – are good at what they do, some of them are not good at managing money.
Good small business finance management is critical if you are to stay in business. Here are some mistakes that people often make in managing the finances of their business.
They often buy things their business really cannot afford, using a credit card. They then have to pay a great deal of interest on top of the purchase price. Rather than paying out all this money, consider other options such as buying second-hand or even doing without until the business can really afford it. Even getting a small loan will give you a better interest rate.
Most business owners have a transaction account for their business and this is good, but you also need to have another account with higher interest so that you can make more money from your profit. Leaving money on the table by keeping all the business money in an account that offers little interest is just plain wasteful.
Many business finance mistakes are made because the owners do not track their expenses. They have no idea how much they are spending or whether all the invoices have been paid. When you don’t know where all the money is, how can you know how much you have to spend? A monthly budget is a sensible idea and will help you to plan for the future.
Trying to do everything when you are not good at doing it is another mistake many business owners make with their business finance. Outsourcing certain chores such as accounting may seem costly but it will free up your time to do what you do best – run the business. Besides which, when you try to do things for which you have no training, your mistakes are likely to cost you more than outsourcing fees would have.
Trying to look flash can cost you more money than you should spend on your business. While the latest design in office furniture and fittings may look wonderful, it does not really bring in the money. Your customers will be more interested in whether you offer them value for money and treat them with respect.
Not learning from your mistakes can also be a costly exercise. Many business owners simply don’t seem to see where they went wrong the first time and they do the same thing over again, expecting to get different result. This is a form of insanity, according to some people.
Not asking for help is a big mistake in business. Flying solo is more difficult than taking on board a mentor or two, especially when much advice can be accessed for free from government agencies. A mentor can help to keep you going and show you where your worst mistakes are if you cannot see them for yourself.