As a business owner, whether you are just starting up or have been in business for quite some time already, it’s vital that you take into account some of the most common financial pitfalls that small businesses experience so that you can be sure you are doing everything in your power to avoid them.
As they often say in business, ‘the smartest thing to remember is to know what you don’t know’, which implies that you need to be constantly learning so that you can stay one step ahead.
Let’s go over the main pitfalls to get to know – so you can avoid them.
Get A Cash Reserve Built Up
The first pitfall to avoid is not having a good sized cash reserve built up. It’s a must that you get some funds in place so that if you are in financial strain, you have somewhere to turn.
Far too many small business owners aren’t building up a reserve and wind up in trouble when crisis strikes.
Start building this up from day one so that it is never going to be an issue for you.
Avoid Credit Cards Whenever Possible
Next, you should avoid using credit cards as much as possible. Far too many business owners rely on these, but always remember that you will pay interest on that money borrowed and often the rates are quite significant.
You’re best off seeking an alternate source of finance whenever possible rather than using credit.
Always Keep Business And Personal Separate
The next must-do tip to help you avoid financial disaster is to keep your business world separate from your personal world. This is going to help you track spending better and when it comes time to applying for a loan or grant of any sort, you will have much more success with garnering that funding if you have kept things separate.
This also means making sure that you are paying yourself enough of a salary to keep your personal world afloat as well.
Some small business owners will immediately invest money right back into the company and while this can be beneficial for overall growth, it’s not if you aren’t paying yourself anything. Balance is the key.
Stay On Top Of Accounts Receivable
Next, make sure that you are staying on top of accounts receivable as well. Your customers are the income generating pieces of your business and if they are not paying, that’s a fast way to find yourself in debt.
Make sure that you are constantly monitoring your accounts receivable and going after those who are not paying what’s due.
Get Help From Professionals
Finally, don’t neglect to get help from professionals. Sometimes this is really what’s needed to help improve your financial situation and get the advice you need.
Don’t go at it alone when there are people who can help.
So there you have the main points to know and remember to avoid financial pitfalls. Are you making any mistakes?