Financial management isn’t everyone’s idea of fun on a Saturday night. Yet, so many small business owners decide to take on admin tasks they despite and work all hours of the night trying to work out why they haven’t got enough to pay for the business insurance coming out on Monday.
If that sounds like you, then keep reading. We’re going to unshackle you from the chains of finance management mistakes and show you which ones you’re making and how to overcome them.
1. The Do-It-Yourself Approach
It’s natural for small businesses to start off taking on all admin tasks when money is tight, but too many fail to understand the implications of carrying on with this. You’re not going to be able to be an expert on all the different taxes, health and safety rules, and employment laws.
Outsource your accounting to professionals who have the appropriate expertise for your needs. Make sure they have up-to-date knowledge of the latest legislation in the countries you operate in.
2. Not Setting Monthly Business Goals
Planning is a vital part of establishing a strong financial foundation. By setting monthly goals, you give yourself an idea of where the money will go over time.
Set at least three long-term goals for your business, on top of your monthly revenue reports. It could be product sales, capital expenditure, staffing levels, and so on. Doing this can lead to new ideas on how to improve your company’s performance.
3. Lack of Personal Finance Management Strategy
An accounting mistake or an unauthorized expense is never fun, but a potential personal financial issue will put a dmaper on your business’s success. These can include tax debts, costly maintenance costs, and interest charges damaging to your cash flow.
Treat your personal life like a business. Work out how you can cut back on spending while utilizing your income in the best possible manner.
4. Poor Cash Flow Management and Misunderstanding Your Sources of Income
Cash flow is where your cash flow management needs to shine and where most small business owners mess up. It’s as simple as checking your bank account balance regularly, but the issue is that you need to maintain a healthy balance in your account so that you don’t run out of money too early on.
Use reliable bookkeeping software such as Redi2.com. And if you’re a sole proprietor, make sure your personal and business bank accounts are separate so you can control your flow better.
5. Excessive Staffing Levels and Other Sources of Spending
Putting too many people into the company is not good business practice; instead, it can have the opposite effect. You’ll spend money on wages, which you could better use elsewhere in your business, and will double the amount of administrative work you need to undertake.
Focus on quality over quantity. Do the math and find that person who will give you the best value per hour. It might cost more per hour, but you’ll need them on board for fewer hours than you think!
Finance Management Mistakes Cost More to Fix
You can overcome these five finance management mistakes by taking away the stress of the daily admin tasks and outsourcing to professionals who have specific expertise for your needs.
You can also create a culture of personal financial management in your personal life, ensuring that you have healthy cash flow throughout the year to be financially secure whenever you need to bounce a check.
Keep reading for more amazing business advice that’ll save you money!