Small businesses have a lot on their plate when it comes to finances as it determines the state of their business. Many small businesses have trouble managing their finances, and encounter problems without knowing it. Ironically, many of these small businesses having trouble are making the same mistakes. Learn from these top five financial mistakes small businesses make and keep your business in business.
1. Your Business Has No Financial Policies Established
Since there are fewer employees who wear many different hats, policies are important for small businesses to establish rules, regulations, and procedures. It is the same for finance matters. Financial policies provide assurance that everything regarding finances is carried out in the same manner. Policies also encourage efficiency, as each employee learns the policies they are more accustomed to how to handle them. The important policies to have for your small business include handling petty cash, an employee reimbursement program, filing systems, and receipt saving.
2. You Don’t Use Help Available to You
Small businesses have a plethora of help available to them via the Internet. Additionally, there is help for accounting, payroll, and taxes using Quicken or Quickbooks. Each of these programs help small businesses manage their finances with an easy and affordable program. Additionally, many small businesses are using outside resources for help to ensure their finances are up to par. These resources include bookkeepers, tax advisers, and accountants. While these people are great to help you, be sure you take the time to research and find out which are qualified, reliable, and affordable.
3. You Don’t Backup Your Electronic Finance System
If something were to happen to your electronic filing system, it would be disastrous to your business. Your records and hard work would be eliminated without any backup. It is important to make sure you have a back up system to preserve your records. You can easily do this by burning the information on a CD, using an external hard drive, using a backup service, or print hard copies.
4. You Spend Money You Don’t Have, or Before You Should
Small businesses, especially start ups, don’t have much cash to spend that they actually have. It’s important to realize what you do have to spend, that you have the means available, and that you absolutely need the purchase you want to make. You can’t take a big leap before you know you can afford it without threatening the status of your business. Take into account your future plans and be sure you have enough to accommodate for them.
5. You Don’t Have A Business Plan, or Don’t Use the One You Have
Making a business plan takes hard work and time. It is important to have one to manage your money while trying to attain your goals. In your plan, you need to have the correct and current financial information to be able to forecast the future. Also, a plan allows you to budget your money more precisely. If possible, try to have an emergency fund just in case you need some extra money for a project, or if you are at your wits end and need to keep your doors open.
It takes an extraordinary amount of work to fix a mistake rather than to prevent one. The next time you are managing your finances, remember these mistakes and try to avoid them at all costs.