Being a small business owner can be extremely rewarding….and extremely daunting. You are responsible for generating revenue for your company, yourself and your employees, working hard for every dollar. With your laundry list of things to get done every day, week or month, having enough money to pay your bills and your employees should not be one of them. Having started your business with sufficient funds and a plan, here are a few reasons why money issues might still be nipping at your heels.
1. Poor Accounting Management— Most business owners have a “can-do” attitude towards things like finance and try to tackle accounting themselves, or hire the cheapest person available that knows something about numbers. This is not the way to handle your livelihood and the life-blood of your business. Ultimately cutting corners like this to save money will end up costing you more. Hire a professional and have them set up user-friendly accounting system software that’s right for your business. Being conscientious about recording expenses and income into your software is key to knowing where the money goes at the end of your financial year.
2. Cheating on Your Budget— Not taking the time to draw up an annual or even monthly budget means unpredictable spending. Don’t spend your working capital on a long term investment, or miss out on lower tax rates by not planning your spending. Covering the long and short term of your business can be handled by creating a yearly budget as well as a monthly budget. Having an over arching guideline for your finances considers the longevity of your business and a month to month plan incorporates day to day realities like slow sales months in the winter. The key is to prioritize your company’s spending.
3. Impulse Purchases— Lots of business owners make impulse buys either out of a “stroke of genius” for the company or to reward themselves for all their hard work. Either in the form of a new computer, or a company car, these kinds of purchases dip into your emergency funds. Don't rely on these funds for impulse buys that aren’t a part of your business plan for the year. These kinds of purchases dry up your business’s funds, what happens in a real emergency?
4. Underpricing Services— So many new businesses try to break into the market by undercutting their competition. While this may work for a little while, it is no sustainable business practice. Under quoting just to win over a new client can bring doubts about the quality of your service. If you truly believe in the quality of the work you do, the work will speak for itself and your customer will be satisfied.
Ultimately creating a budget and sticking to it will do your business a great service. Having a professional help you keep track of your financial health is an investment you will see a return on.
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