As far as starting a business is concerned, the budget is all that matters. Ensuring a healthy bottom line is most important if you want your newly-launched venture to take flight and grow.
However, small businesses make a variety of financial mistakes too often that allows their hard-earned money leak away.
To avoid making these mistakes that small businesses make and ways to fix them, check out the six most common mistakes that businesses make below:
Overpaying their taxes: Every business has a social and legal responsibility to pay their taxes, but some businesses overpay just by misunderstanding the complex system of taxation or mismanaging their finances. Keep track of all your receipts and be prepared to put the time in for admin – no matter how small.
Being dazzled by the topline: It is very easy to get blindsided by the competitors and their extravagant spending, but the truth is your bottom line is much more valuable than over the top revenue. Always think about profitability before hiring and remuneration – a small business operating with higher levels of profitability is a stronger business overall.
Impulse spending during the startup phase: It is very easy to get carried away with the excitement of the whole thing – buying custom office furniture, company cars ever – but before you know it, you’re eating into the bottom line and your profit margin. Scrutinise every expense for cost-benefit; every naira should count towards improving the business in a measurable way.
Diversifying prematurely: Following initial successes, businesses generally look to the future. However, rather than investing in their own business, some owners decide to diversify before they’re ready. Before embarking on new ventures or diversifying your business model, ask yourself why you’re doing it and if it’s a good idea.
Mixing being busy with being productive: If you think getting more from your business means running yourselves into the ground, your strategy is flawed. Money is earned, or saved, by working more effectively with the resources you already have. Sit down with your staff and address the strategy of your company. Look to identify shortcomings and areas where improvements to efficiency and profitability can be made.
Not keeping a cash safety net: The truth is, in business, cash flow goes through ups and downs. This is not a problem if you have savings at hand, but if you don’t, then one dry spell could be detrimental to your business. Be strict in maintaining an account balance equivalent to at least two months of operating costs. That way, you can go through any rough patches and give yourself time to turn things around.
Pay attention to the small details and scrutinize every penny spent because that is the lifeblood of profitable enterprises.