Small businesses go hand-in-hand with tight budgets, with many business owners walking a fine line between making a profit and investing money back into the company. However, small errors can quickly grow into unmanageable debt if not promptly nipped into the bud. Read on to discover five common financial blunders small business owners make so that you can learn from their mistakes!
Failing to Keep Track of Incomings and Outgoings
The busier you get, the harder it is to find the time or concentration to balance the books. However, bookkeeping is one task that must be kept up-to-date. Your financial situation is something you should always have a clear picture of. With this in mind, it is worth taking the time to find someone who specialises in small business accounting to assist. Find an SMSF accountant near you, check out their reviews and customer testimonials, and if their reputation is solid, you’ve got an ally who will help you thrive financially.
Growing the Team Too Quickly
You are likely drowning in admin, juggling sales calls, marketing demands, and stock-taking. You’re practically living at your desk and talking about the business in your sleep. If this sounds familiar, you need help.
Many small business owners will try to find a jack-of-all-trades to help out with anything and everything or look to take on multiple staff to meet the business needs. However, there is a real danger of growing the team too quickly and struggling to make ends meet.
It isn’t uncommon for there to be ebbs and flows in the profit in a small business. Rather than overextending yourself or hiring someone who doesn’t meet your needs, you might consider outsourcing specific tasks to a freelancer.
Splashing Out Cash
You have probably heard the saying, “never count your chickens before they hatch,” but you need to take the next step and translate it into “never spend the profits before you have them.” It isn’t quite as catchy, but it certainly is relevant.
Don’t assume that a deal or sales opportunity is a “sure thing” until the money is in your bank account. Many business owners have been caught in sticky situations because they spent tomorrow’s money today. If the opportunity falls through, you’re left with all the bills but none of the money to cover them. A better option, if you need instant cash flow, is to consider a reputable business finance provider.
Not Paying Taxes
Some celebrities may get away with dodging it, but let’s be clear – you have to pay tax. You might think you can ignore it and worry about it later when you have better cash flow, but rest assured, your spending needs will grow with your income. Running your own business means managing the tax yourself. You will generally need to submit an estimated quarterly payment to avoid a massive bill at the end of the financial year.
Mixing Business with Pleasure
It might be tempting to use your personal bank card to buy something for the business or vice versa. However, you should avoid this at all costs. Keeping your company money separate from your personal money is crucial to assist with transparent accounting. It will also help you avoid being slapped with a massive fine for the inappropriate personal use of business funds. Instead, set clear boundaries from the outset with separate banking accounts and credit cards.
It is crucial to set a solid foundation and robust processes for small business finance and money management. As your company grows, you will reap the benefits of having exemplary practices in place from the outset.