Managing your finances correctly is just as important as improving your product or services and attracting new customers. And if you’re like the most of rookie entrepreneurs, chances are managing money isn’t your strongest suit. Still, if you put enough time and effort into it, dealing with your company’s finances shouldn’t be impossible. One of the most important things you’ll have to do is make sure you don’t make some of the common small business money mistakes that might slow down the growth of your business or ruin it completely. Therefore, we have come up with a list of 4 most common money mistakes small business owners make and tips on how to avoid them.
No matter what's the size of your business, mixing your company's money with your own is never a good idea. If you're a sole owner of your business, chances are you'll be tempted to do this in order to deal with some unplanned expenditures or debts you didn't manage to pay off the way you've planned. Still, mixing too much of your personal funds and the funds from your business will leave you unable to keep track of how much money your business is actually making, which can lead to some further problems arising. If you simply have to use your personal funds, it's recommended that you make a formal transaction and document it.
Another thing you might find difficult when running a small business is determining the correct prices for your products or services. This can cause you to underprice your products or services and leave you with less money than you need for dealing with your expenditures. The best way to avoid this is to sit down and try to figure out all of your expenses. Also, when determining the price for your products or services, you should take into consideration the prices your competitors offer. If you're the lowest charging vendor out there, chances are you're under pricing and missing out on more money for your company.
Insufficient cash is one of the most common causes of small business failure. You can easily overestimate how much money you'll be making which can also leave you unable to deal with all of your company's expenses. In situations like this, turning to a company that offers small business loans is the best possible solution. Another reason why you might have to deal insufficient cash in your company is failing to collect all of your debts on time. Sending a polite reminder should help you deal with all of your debtors. If that fails, you can always turn to professional debt collectors who'll deal with this issue for you.
Due to the fact that they’re running their small business on a shoestring budget, a lot of new entrepreneurs decide to go on without anyone’s help. Still, believing that your company isn’t big enough for you to turn to an advisor is a big mistake. Dealing with all the finances yourself can result in tax problems and difficulties when doing business with other companies. Therefore, it’s safe to say that every business, no matter big or small, needs a good financial advisor. Having an attorney as well is also a good idea, especially in the earliest stages of running your small business.
Make sure you avoid all of these mistakes and you’re most likely not going to join all of those small businesses who didn’t make it in the business world. Also, don’t forget to look some new ways you can improve your money managing skills and be assured there’s always enough money for your business to move forward.