Managing finances has always been a little tricky. Staying up to date with every dollar and where its going, whilst knowing what the best area for it to go into is, can be confusing and even a little overwhelming at times. Especially, if your area of expertise is in leading your business and being a visionary… you might not have the skills or natural insight into the financial side of your company. However it is critical to gain clarity on this and continually evaluate your financial situation as the finances of a business can either make or break it. Here are 5 mistakes that business owners are making when it comes to their finances.
- Avoiding
Avoidance of what feels confusing is a short term solution, but can often cause long term pain! Everyone has areas of life that are confusing because they are unfamiliar but what we need to do when something is confusing, is consult people who have expertise in that area. Instead of letting your finances pile up and get more and more out of control, it is important to tackle them while you can and ask the right questions of the right people to get resolve. If you don’t personally have the time to invest in the research required to understand your financial situation, you may consider working with a bookkeeper or an accountant to help you manage this area of your company.
2. Not evaluating regularly
Not evaluating your finances regularly cannelloni for certain things to slide under-the-radar, and expenses to continue unnoticed. By implementing habits of analysing your finances consistently you are monitoring and managing this area of your business in order to optimise your efficiency and profitability.
3. Not having a financial plan
You wouldn’t start a business without a business plan, you wouldn’t coach a sports team without a game plan, so why would you look at your finances without a financial plan? Planning is everyone’s best friend and anyone in business knows this. Plans allow you to look at where you want to go, and discover what is required in order to get there. A financial plan should include financial goals for both short-term and long-term, as well as your financial history to help bring clarity and meaning to your decided next financial steps.
4. Not planning for tax
When you’re running a business there are so many things that take your focus and time. time flies by in meetings and new ideas and concepts and product pictures which can allow for your finances to fly under-the-radar. When this happens you may find that you are not preparing or mindful of your upcoming tax obligations and requirements. It is difficult to remember everything by yourself which is why you could consider consulting professionals in this area. At the end of every financial year you will have tax obligations that you must fulfil, you will have payments to make and you will have paperwork that needs to be organised full stop knowing what this means for your company and your financial situation is critical.
5. Failing to create a budget
We mentioned earlier the importance of a business plan and just as important as this is a budget. A budget allows you to set and work within these boundaries in order to be successful. Creating a budget will lead you through a process of looking at all of your business’s expenses, and should allow you to consider what you could remove from your weekly, monthly and yearly costs. You may also find expenses that could be removed, or expenses which could be minimised. Perhaps you could consult a new company at a cheaper price to give you some kind of service which you are currently receiving, or perhaps there is an expense that could be lowered by getting someone in-house to do it for you.
Overall, the financial situation of a business is critical to their success. If companies can focus on improving these 5 areas, and placing a focus on ensuring they are doing what they can with the right professional advice to optimise their financial situation, they should be positioned to achieve their goals.