Maintaining healthy finances in business is essential for the company to be able to grow and evolve into new markets and areas.
There are some common mistakes that businesses make, particularly at the start up stage. Knowing what these are and how to avoid them, greatly enhances the chances of your business becoming a huge success.
1. Overpaying Their Taxes
Every business has a social and legal responsibility to pay tax, but some businesses can overpay simply by misunderstanding the complex systems of tax codes or mismanaging their expenses.
Keep track of all receipts and be prepared to put the time in for admin – whether it’s £5 or £500, tax relief claims can quickly add up.
2. Being Dazzled By The Topline
It’s easy to be blindsided by competitors and their extravagant spending, but the bottom line is much more valuable that the revenue at the top.
Always be thinking about profitability before hiring and remuneration – small businesses operating with higher levels of profitability, are stronger organisations overall.
3. Impulse Spending During The Startup Phase
When starting a business, it’s easy to be swept up by the excitement of it all – buying custom made desks, drink machines for staff or company cars. But before you know it, you’re eating into the bottom line and your profit margin.
Scrutinise every expense for cost-benefit; every pound should count towards improving the business in a measurable way.
4. Diversifying Prematurely
After initial success, businesses generally look to the future. But 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.
5. Confusing Being Busy With Being Productive
If you think that getting more from your business means running yourselves ragged, your strategy is flawed. Money is earned, or saved, by working more effectively with the resources you already have.
Sit down with staff and address the strategy of your company. Look to identify shortcomings and areas where improvements to efficiency and profitability can be made.
6. Not Keeping A Cash Safety Net
The reality of business is that cash flow experiences ebbs and flows. This is no issue if you have savings at hand, but if not 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 weather any rough patches and give yourself time to turn things around.
Source: infographic from MakeItCheaper