No one in this world is perfect. We make mistakes, some with minor consequences and others with much more severe consequences. Regardless, mistakes are mistakes, and you’d want to try and learn from them as much as possible. Better yet, learn from others and avoid it yourself, especially when it comes to running your small businesses.
Money is the blood of your business, and if you mismanage your money, your business dies. That’s the sad reality. As such, we want to share with you common financial mistakes small business owners make that you should avoid:
1. Combining Your Personal and Business Accounts
You should, at all times, keep your personal and business finances separate. Truly separate. You should never be paying for your personal expenses with the company credit card, so don’t even think about paying for your personal bills with business funds. These are basic principles of managing a business, and yet, businesses regularly get caught up in these traps. Making these mistakes will only make your accounting and bookkeeping efforts a lot more challenging, and it can turn into a nightmare.
2. Ignoring Your Cash Flow
You should know how much cash you’ll have next week, next year, and over the next 12 months. Proper cash flow management is the very foundation of a successful business. If you manage your cash flow properly, you’ll be able to grow your business, pay your bills on time, and invest back into the business. Without this knowledge and proper planning, you can find yourself in trouble very quickly.
3. Not Having a Plan
If you don’t have a plan, you can’t expect to have success. Every proper plan will include goals, tasks, and responsibilities for each person who plays a role in making your business successful. Without this, you can’t keep track of who’s doing what and what the progress should be. It sounds simple, but many small businesses neglect to plan their work because they feel it’s their “creativity” that drives their business. While creativity will play a part in your success, your business planning is the most important part of your business.
4. Not Paying Attention to Your Numbers
It’s tempting to focus on what’s happening right now, but by doing this, you’re neglecting some very important numbers. You should ensure that you have a proper budget and understand your cash flow, and you should also be aware of how much it costs to run your business and where your sales are coming from. You should also track your profitability and profitability by product or service to better understand your numbers and to look for any problems that may arise.
It is not easy for a small business to make it, but if you do the above, you’ll be better prepared to handle the challenges that may arise. In the end, we should say that you shouldn’t take our word for it. You should research each point, learn to apply it to your own situation, and then see if it works. This is your business, after all, and you need to use what makes sense for you and your business.
BarretStacy Accounting is a friendly team of accountants and bookkeepers in Bristol offering a variety of services to help companies stay on top of their financial needs. If you are looking for a small business accountant in Bristol to assist you with your finances, work with us today!