If you are a business owner or an entrepreneur, you are more likely to be challenged with financial mistakes in your business especially if you are just a beginner but to say the truth, you are not the only that will face or had been facing this ugly scenario. Alot of big entrepreneurs outside have also made some financial mistakes and yet, they are still strong financially.
Most time, entrepreneurs may miscalculate time, investments, risks and profits which may lead them to financial difficulties but if you are really in this shoe, will you quit? Definitely NO because, Winners Never Quit just as the popular saying advised.
Most business owners are smart, ready to take risks, seeks progress for themselves and their businesses etc. but, the more they do this, the more they will make mistakes especially when it comes to financial management.
But anyways, some mistakes can be corrected while some other failures can be avoided while some mistakes may render your company bankrupt and even shutdown your business.
Financial mistake is the main reason why most entrepreneurs closes their business during few years of operation.
If you have been bothering about starting a business due to the fears of committing blunders or making a financial mistake, worry no more as I have compiled some big financial mistakes here in this article and how you can avoid/correct them.
So, let ride on;
7 Biggest Financial Mistakes New Business Owners Makes And How To Avoid Them
==> (1) Account Mismanagement:
Most entrepreneurs are fond of merging both their business account together with their personal account. Although, it might seem simple and effective but let me tell you that this is one of the biggest financial mistakes in running a business.
For instance, if you are using the same account for your business and personal use, it will be pretty difficult to know how to calculate your company’s expenditures, investments, losses and gains.
The best thing you can do to help yourself from avoids this mistake is to have separate accounts for your business and personal use. And by doing this, you won’t be shaken up totally even, when your business run into bankruptcy because, you will still have your personal account to sustain yourself and family pending the time you will get your business running well and good.
A business expert advised that, whenever you earn some profits from your business, the gain shouldn’t go directly into your personal account by first think of how you will invest more in your business now and in the future.
==> (2) Extravagant Purchases for Your Business As A Beginner:
Investing in your business (as a beginner) is not bad when you are starting a new business but, you need to do it the right way at the right time. Instead of buying things that are not essential for you now, think of growing your business.
What do I mean by Extravagant Purchases?
Extravagant Purchases is when you are are buying arrant materials like Electronic gadgets, employing many staffs rather than starting with small numbers of start who you need at that particular type you just start your business, getting latest version of software, website etc.
But, did you think i mean that all these things i aligned above are not good for your business? No, you really need all these things to be candid but, this is not the right time to start buying them. They may seem like investment to you but, you need to think wise and invest wise.
When you have some money with you, instead of buying these things, think of using the little money to generate more revenue for your business.
Instead of using the capital you have to start buying fancy furniture and trendy offices, think of managing the money to get yourself small office with set of chairs and tables.
Also, you can hire freelancers who are experts in your business (from Linkedin, Upwork, Fiverr etc) to help you whenever you need their services rather than employing large numbers of permanent staffs which you may either go bankrupt or be unable to pay their salaries.
When you start making impressive profits, you can start thinking of investing on some expenses like building a trendy website for your business, attending different business seminars, going for business trips, setting up of fancy furniture materials, buying electronics including computers and software etc.
To avoid this financial mistake, you need to Grow your business first and accumulate a higher level of disposable cash before buying fancy materials for now.
==> (3) Large Personal Purchases As New Business Owner:
This is one of the biggest financial mistakes a new entrepreneur tends to make. Even, if you have a personal account which you have separated from your business account, you can still make this mistake.
If you are desperate in having fancy cars, dresses, house, computer gadgets, attending different occasions etc, their is no how you won’t dip into your business account and once you start doing this, your business’ future is at stake.
As a new business owner, you will still have to be patient and generate more profits for your business before you think of spending lavishly on personal materials.
Alot of new business owners who fancy personal materials than investing in the growth of their business are now “broke” financially.
As a beginner, try to be contented with little things you have for now, spend wisely in both your business and personal while you are building a ‘Profit Empire’ for your business.
==> (4) Spending What You Don’t and May Not Have:
It’s good to plan ahead right? YES, I also believe it’s good to plan ahead for the future of your business but, what do I mean by Spending What You Don’t and May Not Have?
Some new business owners are fond of running into debt by buying what they can’t pay for. An instance is a beginner who use his house, company and car as collaterals in the bank for huge loan which he think of using the loan to secure a contract or invest in a deal but at the end of the day, the deal or the contract failed. What do you think?
The bank won’t think have mercy on him because he lost the contract but, the bank officials will have nothing to do than to use the collaterals (his house, company and car) to automatically pay the man’s debt.
What do you think will happen to this man? He was left with nothing to rely on; his new business, car and house are no longer with him again.
It’s advisable that you invest on your business don’t try to overdo it as a beginner.
==> (5) Ignoring the Habit of Saving:
All business owners (both new and old ones) need to inculcate the habit of saving for emergencies and time that things might not work well in their businesses.
Although, nobody expects bad deed but according to a fact backed by the christian book, time and unforeseen or unexpected circumstances do happen to us and if it happens, it will also affect our businesses.
Some entrepreneurs who have had alot of experiences about running a successful business advised that business owners need to save at least three months worth of expenses in an emergency or contingency fund for both their business and their personal expenses. The best ways to save for emergencies is to get your business insured in a reputable insurance company.
==> (6) Lack of Preparation for Tax Payment and Other Must-Pay Fees:
We all know that payment of tax is compulsory for everybody and you are not left out even, if you are a beginner.
Prepare for tax payment according to the type of your business because, different types of business attracts different type of local, state and federal tax obligations.
You know that the government will use this tax levels for the benefits of everybody including YOU and your STAFFs.
Don’t take tax issue as a joke or unserious matter, alot of business owners have been charged to court of law because of tax fraud while government have also shutdown some business’ operations.
Since you have think and accepted to start your own business, you should always bear it in your budgets that tax payment is very essential and you must pay it to avoid any legal disturbance.
==> (7) Ineffective Business’ Budget Plan:
The final on my list of 7 Biggest Financial Mistakes New Business Owners Makes And How To Avoid Them.
We all know the reason for effective business plan, this will enable you to run your business without any fear of what may happen to you or your business in the future. Before you can be rest assured on your business, you must have had a good and well-planned budget which will be guiding your inward and outward expenses.
To say the fact, if you adopt the system of having a clear budget, you will have increases in financial discipline and as well have a clear route to your business development now and in the future.
These are the common and biggest financial mistakes you may like make or have been battling with.
The best ways to avoid those mistakes are by planning your budget and tracking your expenses effectively, always try save for emergencies, have separate accounts for business and personal purpose, don’t spend lavishly on your personal materials and don’t ever think of spending the money you don’t and may not have.
What do you think about this article? Is it helpful or you will like to add or subtract from it? Kindly let me here through your comment in the comment section below.