It’s a well known fact that the first year is an extremely important time for small businesses. Entrepreneurship has a steep learning curve and can be extremely unforgiving if mistakes are not learned and compensated for promptly. The business has to establish itself as a brand, differentiate itself from its competitors, hit the ground running in terms of operations, draw business through digital marketing and make it to the end of the year with the entrepreneur’s sanity intact. In conclusion… Not an easy job! Among the many challenges that small businesses face is the delicate balancing of their finances. Mismanaged finances can at best complicate your daily operations and at worst make your business another in the long list of small business failure statistics. Fix Your first year finances by attending to these common financial missteps…
Under or Overspending
One of the finest financial lines an entrepreneur will walk is in managing their initial overheads. Due to the difficulties in ensuring funding, many entrepreneurs shoot too low and either secure too little funding leading them to cut costs against their will or under invest in infrastructure that could offset initially high costs by increasing productivity or output. Don’t be afraid to make sizeable investments if your calculations demonstrate that they’ll pay dividends, but at the same time never stop looking for free resources that are functionally similar to those you’d pay for and can save you money without compromising your productivity.
Poor cash flow
Poor cash flow can seriously inhibit your finances. Unpaid bills can escalate and potentially sour your relationship with suppliers. You could find yourself unable to purchase enough stock to match consumer demand or, perhaps worst of all, you could find yourself letting golden opportunities like a bulk batch of stock or a piece of equipment that could boost productivity pass you by. Poor cash flow can hobble your business, at best impeding growth and at worst leading to failure and collapse. Fix this potential dilemma by using upselling techniques or using special offers to free up cash tied up in stock. Make sure you’re assertive with chasing up debtors and make sure you know which lines of credit (such as bridging loans, credit cards or other cashflow finance solutions) are available to you.
Choosing the wrong accountant
With so many accountants out there, it’s easier than you’d think to choose the wrong one. Believe it or not, an accountant doesn’t legally have to be qualified, registered or chartered in order to practice. To make sure that your business doesn’t fall afoul of the tax authorities you should always use chartered accountants. The right accountant will not only have impressive credentials but will have experience working with businesses similar to yours. They will also share your passion for your business and demonstrate a personal investment in your business’ core ideals and aims.
Mixing business and personal finances
Many businesses are guilty of this in their first year and beyond. It’s important to keep your personal and business finances separate or you could face all manner of financial, and potentially even legal, problems. Using personal finances for business expenses or vice versa can lead you down a very dangerous path.
*This is a contributed post