Many startup businesses fail due to mismanaged financial activities. As a business owner, it is important to stay on top and in control of your finances. But we all know it is not easy. Especially if you are alone in juggling everything – from looking after your business to managing your cash flow.
We know it is hard. But if we are aware of all the financial mistakes that we can make during the start of our business, we will be able to avoid it and make wise and informed decisions. So here are the things that you should avoid if you don’t want your business in the dumpsters:
Not having a business plan
Planning is very important in starting a business. You just don’t jump off starting a business without any blueprint or map to guide you. You will get lost and fall hard to the ground.
And the most important part of your business plan is your finances. You should have your working budget and your cash flow forecast. These two will help you in making decisions about your business. It will also be your guide to track if your business is performing or not.
Ignoring the importance of bookkeeping
One of the reasons why businesses fail is they neglect the importance of keeping an organized financial records. You should prioritise having updated books. Updated books can help you track your progress and make accurate financial forecasts so you can make the right decisions for your business.
Mixing business finances with your personal money
This is the most common financial trap starting entrepreneurs make when starting a business. They tend to mix their personal money on their business capital when they are struggling with their finances. This should be avoided at all cost. If you will combine your personal money to your business capital, you will have a hard time tracking the performance of your business.
Cutting cost doesn’t necessarily mean improving revenue
We aim to improve our profitability. And we may think of cutting back our expenses to achieve this. However, there is a limit on cutting back business expense. If you are planning to cut back on your expenses, make sure to analyse your drivers of revenue.
Many businesses often cut costs on their marketing. This may be a good move for some business, but don’t forget that every action has a corresponding reaction. Cutting your marketing budget MAY result to limited brand exposure and awareness, which is very critical in driving sales to your business especially if you are just starting.
Being afraid or doubtful about debt
All business owners would want, as much as possible, to have a debt free business. But debt is part of every business financial plan. Don’t be afraid and misguided about debt in business. Because you might be missing opportunities by not maximising it. If you are unsure about it, you can talk to experts or your personal business advisor and accountant.
Juggling things on your own
Starting a business is indeed overwhelming and exciting. You want to be hands on with everything. But a good business owner knows how to delegate especially when it comes to the finances of its business.
You can learn and do the accounting, bookkeeping and tax compliance. But it is advisable that you let professionals do it for you so you’ll have a more accurate result. This will also give you enough time and energy to focus on other important things on your business. Don’t juggle everything on your own. Ask expert’s help and make your life and managing your business easier. Having an expert and professional to work for your finances is also an investment.
No one wants to see their business in the dumpster. But being unaware of the possible actions that can jeopardize our business will only leave us in a dead end. So it is only right to know these mistakes and avoid them at all costs.
As a starting entrepreneur, you need help from other people to help you start and grow your business especially in terms of finances. As one of the trusted accounting firms and business consultancy company in Mackay and Brisbane, Australia, we, at Launch Accounting have helped many starting entrepreneurs launch their business. We help them with their books, give them accurate financial reports and advise them with the things that they need to do about their business.
If you require more info feel free to ask the team [email protected]