Last Updated on May 26, 2019 by Jessica Adams
Running a company is not easy business! There are so many things that need to be considered. Like developing marketable, income-generating ideas or how to outsmart the competition. One area that needs to be consistently solid is the financial side of your company. With that in mind, read on to discover some of the financial mistakes that can cripple your business so that you can avoid making them.
Financial Mistakes That Can
Cripple Your Business
Mixing Personal & Business Finances
This is a mistake that a lot of start-up and small business owners make. It’s also one that can have worse consequences than you may imagine. Mixing your personal and business finances makes it incredibly difficult to stay on top of what is what. Not only this but if you find yourself on the wrong end of a tax audit, they may assume that you have purposely mixed your finances to be deceptive. The last thing you want for your new business is an IRS tax audit! They can have severe consequences in the form of large fines and even jail time.
Spending Time On Activities That Don’t Generate Cash
You know what they say, time is money and this is most definitely the case in the business world. One of the biggest mistakes you can make as a business owner is spending too much time on business-related activities that do not generate any cash. I know what you’re thinking now. “What the…?” An example of a business-related activity that doesn’t generate any cash for your business, is volunteering your time or mentoring someone. Another example is offering free services in order to meet potential “paying” clients down the road. While volunteering, mentoring and offering free services are actually all great moves to make in the business world, it is very truly that none of them generate any money for business (at least immediately). So it’s best to wait until your cash flow situation is, well, not a situation!
Hiring The Wrong People
It does not matter whether you are looking for someone for software development or to handle your payroll department, hiring mistakes can be critical. There are many ways that this can cost you your business’ reputation. First, the hiring process itself is expensive. It becomes even more costly when you need to let someone go and look for another employee to replace them. Then if the person in question wasn’t good at their job, it can cost you in the form of inefficiencies and mistakes too. The best thing to do is hire full-cycle or specialized recruiters, like payroll recruitment consultants. You also need to spend time refining your recruitment process to ensure you advertise in the right places and ask the right questions.
Inefficiencies Will Lead to Error
Inefficiencies will always, eventually lead to some type of mistake or error. Now, let’s say that error is a financial one and it could cost you your business. For example, all business owners need to have an emergency fund so that they can quickly react if anything goes wrong with a client or project that they’re managing. What would happen if a computer or another piece of machinery broke and you did not have the funds to replace it?
Speaking of cash flow problems, they can plague businesses. You need to do everything you can to get paid on-time, which includes having a solid invoicing process in place. This will ensure that you send out invoices for prompt payment at the earliest opportunity.
As you can see, there are a number of different mistakes that business owners can make, with regards to the financial side of their business. Each of the errors I’ve listed here can have severe consequences, so it’s important that you make every effort to avoid making them.
This has been a guest contribution from Dana Ghery, in the Small Biz “Mini-Post” Series. 1K words or less & open for Guest Posting!
Edited By Jessica Rose Adams
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