Many small business owners go into the game blind. It’s easy to get caught up in the stress of owning and running a business, and we often see small business owners making critical, but common, financial mistakes that end up leaving their company at a disadvantage. Below we discuss these financial mistakes made by small businesses, so that you can keep them in mind when managing your business.
Business vs Personal
It’s important to keep your business and personal finances separate. By keeping these two apart, you’re able to realistically track the financial status of your business and monitor where and when you need to make changes. This can also help when applying for additional business funding in the future, as funding companies need an exact layout of how your business spends and makes its money. To do this, ensure that you develop basic systems early on, that can work throughout the growth of your company.
Is The Price Right?
Often, small businesses feel the need to beat their competitors from a price point of view, and end up underpricing their products. This a risky move, as you would then need to push more sales in order to meet your financial targets. When pricing your product, it’s vital to consider things like manufacturing costs, labor, delivery costs (if applicable), profit margins and your financial targets. You also want to reassess this pricing annually so that your company can withstand things like inflation.
Over Utilising Credit
We’ve said it before, and we’ll say it again – the best time to apply for business funding is before you need it. Applying for business funding during the tougher months can often put you at a disadvantage. It may mean that your funding options are limited and the amounts you qualify for will be lower. By applying for funding before you need it, while your company’s financial health and credit is in good standing, you’re instantly going to have more options available, meaning you’re more likely going to find a funding solution that works best for your business’s needs.
Straying From The Plan
Budgets are around for a reason. A lot of small business owners underestimate the importance of planning their finances in advance and sticking to the plan thereafter. A budget allows you to stay on track for things like paying bills on time, develop and maintain an emergency fund for those inevitable unplanned expenses, as well as monitor the financial growth of your business. By doing so, you’re able to assess if and when your business needs to pivot to ensure your finances stay in check.
Also read: 4 Important Mentalities For Every Business Owner
As a small business owner, you’re bound to make some financial mistakes and learn some painful lessons, but it’s critical to be conscious of the most common ones so that you can plan ahead and avoid them where possible.
Does your business need that extra bit of funding to help it grow? Explore our website, get in touch with us and apply here.