Are you a small business owner? Do you take great pride in making the right financial decisions at all times? Do you realize you have made mistakes in the past, but want to avoid the same in the future?
It doesn’t matter if you own a small family business or one that is growing at a rapid pace, it’s imperative that you always have a strong grasp of your financial situation.
Any finance related mistake, no matter how big or small could have a negative impact on your company. Unfortunately, a serious mistake could put your company out of business.
Here are some of the finance mistakes entirely too many small business owners are making:
1. No Budget
Creating a business budget doesn’t have to be as difficult as it sounds. This can be simple if you know your numbers and implement the right system.
Let’s put it this way: If you don’t have a budget, you’ll begin to make mistakes at some point. There is no way around this. A budget is meant to keep you informed and on track at all times.
2. Too Many Bad Expenses
It’s easy to get into the habit of overspending, especially when you have “money to burn.”
This isn’t something to take lightly, however, as overspending can eventually take a toll on your company.
An example of this would be hiring a professional photographer when you could simply use free photos that you find online.
One bad expense may not be the end of the world, but these have a way of adding up over the course of a month. You need to put a stop to this habit once and for all.
3. Taking on Too Much Debt
There will be times when it makes sense for your business to take on debt.
For example, you may require a business line of credit to fund a large purchase order.
But here’s what you need to remember: There is a fine line between taking on debt and taking on too much debt.
If you have too much debt on the books, don’t think twice about taking another loan. You need to clear up what you already have before you make this move.
Tip: If your credit is less than ideal, you may need to act if you want to secure a loan in the future. Fixing credit sounds like a challenge, but there are ways you can make progress in a reasonable period.
4. Letting Employees Overspend
Does one or more employee have access to a company credit card? Are you concerned that this is having a negative impact on your business?
There is nothing wrong with putting your trust in key employees, but you still need to keep a close eye on everything they are doing.
It’s common for an employee to overspend on a company credit card, such as when they are out of town entertaining clients.
Don’t let an employee get away with overspending. If this becomes a habit, you may need to take back his or her credit card for the time being.
5. Neglecting to Follow Up on Past Due Invoices
If you aren’t generating income, you’ll find it difficult to stay in business.
So, if there are past due invoices that need to be paid, you should put on your “collection hat” and get down to business.
Collecting unpaid invoices is easier said than done, but there are things you can do to improve your chance of success. As you begin to receive payments, your financial situation will improve.
Some small business owners continue to make one financial mistake after the next. Although this will happen from time to time, you should do your best to avoid mistakes that can hold your company back.
The five mistakes above are common, but there are others that could be holding you back.
Have you made any financial mistakes in the past? How did these impact your small business? Were you able to overcome the mistake and learn from it? Share your personal experiences in the comment section below. Your feedback may help another small business owner avoid the same mistake.