STARTING YOUR OWN BUSINESS: MISTAKES TO AVOID

Starting the journey as a business owner can be an exciting and rewarding experience, however, it is important to avoid money management mistakes and learn how to take calculated risks that will benefit your company. With a sizable number of new businesses failing within their first year, it’s important to learn from past entrepreneurs’ mistakes to avoid them yourself in the future.

Common money management mistakes

1. Not having a detailed financial plan

Not having a detailed financial plan will likely lead to imprudent spending. Creating a balanced business plan, which details short, medium and long-term goals, will help you to see the bigger picture, minimising mistakes and leading to greater financial returns. Careful planning will help keep finances on track and help keep your cashflow under control.

2. Mixing of personal and business finance

It may be tempting to use one bank account to organise your home and business finances. However, this makes it easy to lose track of bills, extra costs, and revenue. It will also make it near impossible to create an effective financial forecast.

3. Misunderstanding cashflow

Cashflow is king and has a significant impact on a business’ success with many new and even experienced entrepreneurs overlooking its importance. Cashflow represents the variance of money flowing in and out of the business. Poor cashflow is likely to become an issue for example if clients are not paying for your services by their due date.  Creating an efficient process to monitor accounts payable and received will help you know when to chase the payments in and out whilst managing future financial requirements and expectations.

4.Limited accountancy knowledge

The world of finance can be complicated, therefore daunting and feel over demanding, so it is important to learn key terms and rules you will need to follow and why. Educating yourself will lead to greater money management skills and better results. Don’t shy away from a financial professional straight away as they can help you identify cash flow issues, provide advice, and point you in the right direction to find a solution. It’s important to focus on the right things.

5. Managing Business Deductions

Every business must monitor and control expenditure, which should be budgeted for, and categorised. This will help you to improve cash flow and manage money effectively. Make sure to keep receipts and invoices organised to refer back to ready for when tax season arrives.

Money management is one of the most important parts of a business and should be taken seriously from day one to avoid business-threatening problems. To find out more in-depth information that could benefit you, find online resources and/or talk to a financial professional today.