Did you know 82% of businesses fail due to cash flow and cash management problems?
This can be due to a lack of planning or trying to DIY your finances and making business finance mistakes you cannot overcome. While this is a staggering statistic that may leave you feeling overwhelmed, you can use it to make better financial choices and give your business a fighting chance at success.
If you are a small business owner who wants your business to succeed, here are several financial mistakes you should avoid making.
1. Not Having a Financial Plan
When starting a business, one of the most important things you can do is create a financial plan. This is the part of your business plan details the financial side of your business. Creating a financial plan will help you know if your business idea is viable or not so starting with this plan is essential.
2. Not Following a Budget
If you don’t have a budget or are not following a budget, you can spend more than your business brings in and experience cash flow problems.
Because there are many common business expenses, creating a business budget is as simple as detailing your income sources and determining your fixed, variable, and one-time expenses. Following a budget is the easiest way to take control of your business finances.
3. Getting Into Business Debt With No Repayment Plan
For many small businesses, having debt is necessary to start and run your business. The problem comes when you have several forms of debt with no viable way to repay it. Never take on more debt than is necessary and always have a reasonable, short-term repayment plan.
If you are overwhelmed with debt, search “how does debt relief work” to learn about debt consolidation.
4. Ignoring Your Business Credit Score
Like your personal credit score, your business credit score is an instant indicator to lenders and investors of how well you manage your business finances. Having a good business credit score can be the difference between receiving funding to grow your business and being denied.
It’s important to maintain a great business credit score so you can have another option for funding your business.
5. Combining Your Personal and Business Finances
A common mistake many small business owners make is combining their business and personal accounts. This is dangerous because a misstep with your personal finances can negatively affect your business reputation and vice versa. It can also make your business and personal taxes difficult to figure out.
Separate your business and personal finances from the start to avoid the headaches that are sure to come if you don’t.
Avoid These Finance Mistakes to Have Business Success
These are the common business finance mistakes that result in failure.
Start with a plan and a budget to manage your business finances. Avoid unnecessary debt as this will put your small business in danger of failing.
Don’t ignore your tax planning, keep your personal and business finances separate, and make sure to maintain a good business credit score. Create an emergency saving account so you can stay afloat during difficult times.
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