A first-time business owner may focus too much on the idea of marketing their product to the public. Some amateur entrepreneurs have their minds on how to increase profits. These things are parts of how a business covers ground and takes off. Steady clients and rising profits are excellent markers of a successful business.
But behind these visible indicators of success is a more subtle yet important one. An entrepreneur should also focus on proper money management. When you know how to handle the finances of your business, your trade will have staying power. Business bankruptcy is not as scary as before. A reliable bankruptcy attorney can mitigate losses and help you rebuild fast. Even with this comfort, a business owner would still want to see their business flourish.
Amateur entrepreneurs are prone to committing some mistakes in money management. These blunders may prevent a business to grow or may slow down its progress. Here are some of the most common ones.
Mixing Business and Personal Expenses
A practice that can bring confusion to one’s business is to mix business and personal expenses. It could be that an entrepreneur uses personal money to pay for operational expenses. It might also be that they use the profit gained by the business in paying personal expenses. Either of these two will cause many issues such as jumbled records and overspending.
It is best to have separate accounts for your personal and business expenses. This way, you would have a clear perspective of the financial status of your business. Also, it would not cause problems in taxes and reconciling records.
Closing the Deal with the First Offer
You have to look for suppliers that will be your partners in growing your business. A rookie mistake that a business owner can commit is closing the deal with the first offer. Some may find an excellent supplier with this kind of negotiation. But, it is still better to shop around.
Be very conscientious with scouting for suppliers. Do your research well. It does not mean that you would be looking for the lowest offer. What you need is a deal with a reasonable price and excellent quality. The items you would get from your suppliers will define the value of your brand. If you think that the first offer meets your qualification, you can still bargain the price. Starting with lower deals will help your business to gain footing.
Letting Bills Pile Up
Not paying bills on time is something that a common household avoids. Many inconveniences may crop up because of this negligence. The problems caused by this slip-up doubles in a business setting.
Letting your bills pile up translates to penalty charges or added interest. If the late payment is for a supplier, it may affect your relationship with them. Late payments do not only add to unnecessary costs. It also taints your reputation in the business world.
Losing Track of the Cash Flow
A first-time entrepreneur can get overwhelmed with running a business. There are many responsibilities attached to this role. But, you must not forget to keep an eye on the income and expenses of your business.
The easiest way to do this in an organized matter is to start on Day 1. Choose an accounting software that will be easy to manage. Make sure that you, and any other person handling the finances, are familiar with how the system works. Regardless of the busy schedule, do not forget to set a time to update your records. This small habit will give you higher returns, not only in profit but peace of mind as well.
Being a Secondary Decision Maker
Some entrepreneurs hire accountants to manage the financial aspect of the business. This is a wise move because not all business owners are that adept with accounting skills. It is better to outsource to experts than spend too much time trying to keep your books organized.
But, this does not mean that you have to relinquish all deciding powers. As the business owner, you must still be the primary decision-maker when it comes to finances. You may not know every small detail, but you must understand enough to make good decisions. As such, you can enroll in basic accounting classes to educate yourself. Many free resources can help you make informed decisions.
Money management is an important aspect of your business. Committing many errors in this area might put your business in trouble. But, keeping this area organized will help you to bring success and growth to your business.