Five Business Finance Mistakes You Can’t Afford to Make
The first year of a new business is a testing time. An awful lot of businesses fail in the first twelve months, often through no fault of their own, but with careful planning and a watchful eye on the finances, there is no reason why you can’t enjoy long-term success. So if you are keen to avoid a financial meltdown, read on for some tips on how to avoid the most common mistakes.
Accurate record keeping is essential for a successful business. You can’t ignore the importance of maintaining accounts. Without accurate information, it is impossible to make sensible decisions and plan the way forward. The best way to deal with record keeping is to start as you mean to go on. Implement an accounts system and maintain it daily, or outsource the bookkeeping to an accountant or similar. There will be a cost implication in outsourcing the bookkeeping to a third party, but in the long run it will be money well spent if you don’t have the time or inclination to do the job yourself.
No Cash Flow Projection
Cash flow projections give you an indication of where the business is heading and help you plan for future expenses. If accounts tell you the current financial position, a cash flow projection is a glimpse into the future. Use your cash flow projection to plan for unexpected issues, such as an interest rate rise.
Poor Credit Control
Credit control is very important. If you pay your bills on the dot, but clients typically take two or three months to pay invoices, it won’t be long before the cash flow dries up. To avoid credit control issues, credit check new clients until they prove themselves to be good payers. You also need to be careful about paying your own bills on time – late payments can adversely affect your credit rating. Use credit cards to spread the payments out if necessary.
No Finance Strategy
If your business doesn’t have a finance strategy in place, you are in a risky position. A finance strategy is there to ensure you have adequate finance in place to support cash flow and future growth plans for the business. It is also there to help you plan long-term payments, for example the cost of business insurance policies from companies such as BizInsure.
No Controls on Expenditure
It is all too easy to get caught up in the importance of marketing and chasing new business. These things are important, but then so are other things, such as watching how much you spend on business expenditure. It is at this point that other aspects of finance control come into play: cash flow, bookkeeping, finance strategies and credit control.
If you get the finance aspects of your business right, you are in a great position to build your business and go looking for new clients. Business finance isn’t difficult to understand, but once you start making mistakes in this area, things can soon go badly wrong. So don’t ignore finance – have a sensible strategy in place and stick to it like glue.