Top financial mistakes you should avoid in your small business

While there is no one template for business success that we should all follow, there are many common issues or challenges that all entrepreneurs face as they go about their business.

No matter what industry you’re in, what you sell, or how long you’ve been running your company, there are some mistakes you should do your best to avoid.

Waiting too long to get a loan or investment

You don’t want to make the mistake of waiting too long to get a loan or some foreign investment. Reluctance to leave applications to the last minute to use funds to purchase some expensive equipment, cover inventory shortages during expansion, enter a new market or acquire another venture, among other things.

If you wait too long to prepare paperwork and fill out forms and other documents for loan applications or investor bids, you may miss opportunities. Alternatively, you may have to say yes to an investor that isn’t a good fit for you and your business, or you may have to accept a loan from a company with inadequate interest rate terms or other conditions.

If you’re looking to find an investor or take advantage of a small business loan in the coming year, start exploring your options now. Learn as much as you can about different investors or lenders and what they look for, and you’ll be better off when the time comes when you need some extra cash.

Not being able to save enough money for easy times

Another financial mistake to avoid is not saving enough money for the tough times in your business. While we all hope that growth is stable and continuous and that there are no bumps along the way, as the global pandemic has shown us, we never know how the world or markets will change and how our businesses will be affected in turn.

When cash flow becomes a problem and we need to tap into such funds to cover expenses, we need to set aside some savings to cover easier times. There’s no set you need to save for rainy days, but many financial planners and accountants, etc., recommend that business owners or managers keep three months of business expenses or more in a savings account for emergencies.

Not keeping a close eye on cash flow and other financial matters.

Many of us are so busy attending to the day-to-day running of our businesses and solving problems that they arise that we don’t spend enough time and energy taking a close look at our business finances. Unfortunately, this can lead to many issues, but it is a common financial mistake.

Close monitoring and management of finances is essential to know how your company’s profit levels and cash flow are. You must know how to read and understand important reports and business numbers. For example, all entrepreneurs should quickly check the health of their business by examining accounting records, profit and loss statements, tax returns, income statements, asset and liability statements, etc.

It helps to use convenient technology tools to make this work easier. Online accounting programs and other applications can help you see at a glance how your organization is doing financially and help you identify and track issues that may seem small now (such as declining profits or increasing costs) but can turn into more significant problems over time.

low cost

An underrated mistake is underpriced. Although we often focus on not spending more money on things than we need in our businesses, we need to make sure that we bring in as much money as possible. One way to do this is to raise prices.

Often times, you find that you are keeping your payments too low and thus not earning as much as you could. If you haven’t increased your service prices over the years, or if you’ve set product prices arbitrarily without understanding your actual costs and how much the market will pay, you’re doing yourself and your business a disservice.

These are some of the top financial mistakes you should avoid in your small business. Others try to get away with not filing paperwork on time (for example, to meet tax or HR obligations), targeting too small a client base, and hiring incorrectly and mismanaging employees.

The more financial problems you can avoid this year and beyond, the more likely you will have a prosperous business and less headaches to contend with as a leader.