A plenty of factors can contribute to a business venture’s demise. Sometimes it’s a lack of consumer interest; at other times, it’s a matter of bad marketing tactics. But perhaps the most deadly contributor to business failure does not know how to manage your finances.
Not Having Enough Cash Reserves
Entrepreneurs know that they’ll probably need money to invest in the setup of their business, but it may take several fiscal quarters to realize a steady income from the company, let alone making a profit. So, start with adequate operating cash. Don’t fool yourself with wishful thinking that the money will somehow be there.
Being Plastic Dependent
Some small business owners are forced to turn to credit cards for early stage survival, especially when they haven’t planned properly. Credit cards carry high interest charges and annual fees. Whether through a small business loan, a capital infusion or your own funding, ensuring sufficient operating capital can save you from getting into credit card debt.
Mixing Personal and Business Finance
It’s tempting to cross the line, but keep these two entities completely separate. It makes it easier for accounting, budgeting and reconciling both sets of books, and assists in determining actual profits and losses for the business.
Shorting Yourself on Compensation
In the early stages of business, it may seem like a solid decision to redistribute any and all of your profits back into your business. But not compensating yourself along the way could harm your personal finances and financial good standing.
Not Having an Organized Accounts Receivable System
Print your payment terms on the back of every invoice, and follow a clear process in collecting payments. Make sending prompt reminders part of your business
Running Your Business from a Spreadsheet
Quite possibly,this is the most important to avoid of all of the mistakes listed. In this era of Cloud accounting solutions accurate management of information integrated with daily bank feeds is readily available. Not to take advantage of such information is huge blunder. Yet many small businesses persist keeping their records on a Spreadsheet or worse, in a shoe box.
Hope this will help you in overcoming the mistakes and lead your organisation to a profitable growth without any flaws in the financial aspects.