Keeping your business’ finances high and on top of the game is just as crucial as searching for prospects or new customers while simultaneously serving and accommodating the existing ones. However, if you are somewhat similar to some other small business owners around, perhaps managing one’s finances and bookkeeping is not really your strong suit. You are not the only one having this sort of issue so do not get frustrated about this and instead, focus on getting ahead of the game by avoiding the usual mistakes done by business owners.
One of the most challenging roles of a small business owner is managing their business’ finances; there are a lot of reasons for this yet the most common one is that a lot of small business owners do not have a business finance background. With that said, small business owners tend to focus more on promoting the business and also assisting their customers, while leaving little concern on financial planning and record keeping which is also vital for one’s business. As a result, a lot of owners end up working a lot yet only receive inferior or average success and results to show all their efforts; while some, they fail entirely.
Improve and increase your chances for profitability and success by making yourself aware, while also avoiding the most common business money mistakes done by most small business owners:
- Not Keeping Good and Detailed Records
Having good records safeguards your business in case it gets audited, plus it also helps you monitor the development of your business. Prepare and ready your financial statements and always remember to keep them up to date; document the source of these receipts then also keep track of all the deductible expenses.
If you give enough time and effort to stay at the top of your documentation, you will avoid having to waste time attempting to reorganize business purchases.
- Borrowing a Great Amount of Cash
Remember that the biggest risk that is connected with borrowing cash is not being able to repay the debt after; if you pull out a collateralize loan and cannot pay back after, you may end up losing your collateral which in the end, may cause your business credit ratings to drop drastically. Ensure that all the money you borrow will be used only for income-generating projects.
- Wrong Pricing Strategies
This is one of the most vital decisions a business owner makes daily, and if the prices of your products or services are too high, chances are, you will not get adequate amounts of volume. Yet if you set your prices too low, you could get a lot of sales but you will definitely lose a lot of money.
As suggested by most business advisers, it is best to begin with a slightly higher price while simultaneously monitoring the response of this since decreasing prices are definitely much easier compared to increasing them. This is where great marketing strategies make all the difference, so try various approaches to see what works, track your customer’s behavior and reactions to this, then make adjustments based on your observations as you learn how all these work.
- Combining Personal and Business Funds
It does not matter if you are starting or are already running an established business, if you mix business and personal funds, this will only lead to a disastrous effect. Let us say that you are the only owner of a business and you are the only one responsible for purchasing business supplies, using your personal credit card or using your business’ paycheck for personal purchases will definitely give you a hard time when it comes to keeping track of how much money your business is actually creating or losing throughout the whole year. Also, you will surely have a difficult time when it comes to distinguishing the taxes of the personal and business purchases.
Also, if you have a business partner or investor and still mix these expenditures, you will have more problems at hand since you would require to keep track of their expenditures as well. Moreover, if you do not separate your personal and business expenses where separate banking accounts and credit cards are necessary, it may become impossible for you to get a business loan in the coming future.