It’s no secret that starting and establishing a small business is no easy feat. Not only do you need a good idea and the entrepreneurial spirit to chase it, you also need to go through loads of paperwork and experience the financial ups and downs. Unfortunately, not all small businesses make it and in Australia alone, thousands go bust every year according to a report from the Bureau of Statistics.
Believe it or not, many of these businesses are making the same financial mistakes. Are you? Here are three of the most common:
- Not Preparing a Budget and Following It
A budget will map out revenue, costs and profit for the year (and months) ahead – this will ensure that you aren’t spending more than you can feasibly afford and let you know what expected profits will be. Nobody likes being limited but budgets are there to ensure you can keep your doors open. While some business owners will have a budget, they won’t stick to it. Monitoring your cashflow will ensure you can pay your employees and yourself and can scale the business for success in the long run.
- Not Planning for Contingencies
Things happen in the young life of a small business and emergencies are bound to come up. Make sure that you have a plan for things you can tell are right around the corner and also enough to support the company should the unexpected happen. Create room in your budget and cut spending in some areas to account for repairs, salary issues, or any other financial issue that could impact your bottom line.
- Not Automating Tedious Processes
How long do you spend on accounting and bookkeeping every month? In one study, 40% of the entrepreneurs sampled, reported spending 80+ hours per year. That’s essentially two solid weeks of bookkeeping and reporting work! Our own experiences suggest that business owners spend at least one day per week on paying bills or updating accounts. Whether you use a software program or hire out a professional to do it for you, automating your tedious tasks like bookkeeping, reporting cashflow and tax preparation can save you time and money in the long run (and possibly produce more timely and useful information that will prepare you better for making business decisions).
It might not seem like it but when you consider the price to pull yourself away from day-to-day duties of managing the business to crunch numbers and learn about tax legislation, it makes sense to have someone else do the work for you. Ask us how!
