Having your finances in order when you own a business is one of the most important things you’ll do. Not prioritizing your finances will land you in hot water eventually, whether you’ve been slacking off with your accounts or not tracking your expenses accurately enough.
Let’s talk about some of the financial errors that could end your business – if you avoid these errors, you might just be able to make something of your venture:
Getting The Math Wrong
First of all: if Dragon’s Den has taught us anything, it’s that you absolutely must know your numbers. All good business owners know their numbers; previous and current turnover, expenses, projections, gross profit, net profit, and more. If you get this wrong, you could make fatal mistakes in your calculations. Make sure you get this right from the very start, whether you’re looking to secure business investments or not.
Forgetting About Cash Flow
Cash flow is one of the most important aspects to focus on in business. Securing some money is one thing, but making sure you can keep your business afloat for the future is another thing entirely. You need to make sure you’re getting paid and that you’re being smart with the money.
Making sure you have an effective invoicing process can help this.
Forgoing The Emergency Fund
Having an emergency fund in the bank will help you with, well…emergencies. What if an expensive piece of equipment breaks? What if you have an unusually quiet month? What if you don’t have enough to pay your staff? All kinds of things can go wrong, so having money put aside for real emergencies is important.
Taking Care of The Accounts Yourself
When business accounts are taken care of properly, you can end up saving lots of money on the tax you pay out. When they are taken care of haphazardly, you might end up paying more/less – but eventually, if you are investigated, you’ll get into trouble and may have to pay large fines.
Relying Too Heavily On Credit
Relying too heavily on credit for your business can eventually mean struggling to pay it back. For this there are services and resources like https://www.hudsonweir.co.uk/insolvency-practitioners-london/, however, you should avoid getting into this situation in the first place. A business credit card can make it easy to track expenses by keeping them all in one place, but you should make sure you’re in control at all times and that you’re paying it off.
Spending More Than You Can Realistically Afford
Knowing your budget and sticking to it is all part of owning a business. Even the most successful businesses practice frugality, as making the most of every pound earned can make the difference between success and failure. Consider renting rather than buying outright, and look second hand before buying something new. Make sure you’re always checking over your budget to see if you can make changes and cut even more. In the long run, this will be beneficial to your business.
Are you making any of these financial errors?
