Running a business can be hard. There are many things to consider and your finances are going to be one of your main priorities. When it comes to keeping your finances healthy, you need to pay close attention to all the details. Here are some common mistakes that many businesses make which you should be aware of in order to avoid falling in to the same cash flow problems:
- Not considering fixed costs. When pricing items, many business owners failed to consider fixed costs and instead only focus on the gross profit margin. This can be costly and can lead you to financial difficulty.
- Not getting invoices paid. Some businesses fail to understand that the job is not complete as soon as the invoice has been sent. You need to ensure that you chase the client payment. Some clients will not pay, and may need further action in order to encourage them to pay up the funds. If you have trouble getting invoices paid, you may want to seek legal advice.
- The flow of money. Some businesses think that just because there is a flow of money into the business bank account, it means that the company is making money. However, this doesn't necessarily mean that profit is being made. Make sure that you pay careful attention to your finances and ensure that you understand your profit margins.
- Reviewing financial reports. It is important that business owners take the time to review financial reports. This should be done on a regular basis. If this is not done regularly, you could be at serious risk of getting into financial difficulty.
- Setting a budget. Businesses need to ensure that they set a budget in a comprehensive business plan. This should be over a specific period, usually around 12 months. Business plans should follow the SMART rule, which stands for specific, measurable, achievable, realistic and timed.
- Seeking business loan products. If you need a business loan, this can really help boost your business but make sure that you choose the right loan from the right company. Look at the interest rates and see how your repayment period is going to work. There are many different business loans on offer, some that allow you to just pay with your working capital, which can be beneficial. Others will have higher interest rates but may be more flexible, it is really up to you what you need and how you decide to manage your business loan.
- Do not waste money! Many businesses waste money on things that are unnecessary. Make sure that you keep track of everything you’re spending and ensure that you do not waste money on frivolous or unnecessary items, such as monthly subscriptions you no longer use.