Although small business startups are fairly common in today’s world, it does not mean they’re easy to begin and maintain. Much of it goes into making a small business work and if you don’t have what it takes your business could be one of the one’s that fail.
Of course, no young entrepreneur wants to see this happen to their business, which is why you need to avoid a detrimental mistake most small businesses make: handling your own accounting without prior training.
Your finances are the lifeblood of your business, so it’s only natural that mismanagement of your company’s budget could lead to detrimental consequences down the line.
For some stubborn or otherwise misinformed small business owners, continuing to do your own finances can result in the following:
Not Understanding the Return In Investment
This goes two ways: when a business is investing money in certain areas that are not yielding a positive return and they don’t know about it, they can begin losing a lot of money very quickly.
On the other hand, if a business is spending on all the right things and their internal revenue is growing but they don’t why, it can lead to poor decision making, i.e. spending more money than they actually have, distributing the money they do have too widely or even promising too much to employees and not being able to follow through.
Spending More Than You Have
Sometimes, small business owners have this idea that they must spend a lot of money to make a lot of money. While this is true in some regard, it doesn’t mean you should go out and spend investor’s money on all sorts of things before your business has even had a chance to grow. They hire too many people, lease an unnecessarily large office space, spend way too much on furniture that their customers are probably never going to see, and so on. In fact, this very mistake was expertly executed on NBC’s Parks and Recreation.
Take a look at Tom and Jean-Ralphio to really get this point.
Mishandling Cash Flow
Cash flow refers to the flow of cash in and out of your business. This mistake is most often made when business owners are unsure of how their numbers should look and neglect the net profit on sales. It is best to review bank statements and profit every week or month (or both) in order to keep up with cash flows.
If you happen to be bad with numbers all around, this is really the time to hire an outsourced accountant who can make sense of the numbers for you.
Not Doing Research Beforehand
You’ve got the idea, you’ve got the team, and you’ve got the tools needed to get your business off the ground—but is your budget okay? Many small businesses guesstimate when it comes to their budget, which is a sure way to lose money very fast. If you don’t know whether or not your budget is corrected and properly funded, how can you know how much to spend and not spend on certain items?
Hiring an outsourced professional accountant is the best thing you can do for your business because it will ensure that your budget is well taken care of. This is one of the best investments you can make while your business is still young, so don’t worry about shelling out some money to make this necessary hire. Avoiding this mistake can typically make or break a business, so be smart about your finances to ensure success. For more potential mistakes and how to avoid them, visit this site.
Basis 365 can help you get in touch with an outsourced account. Our business specializes in connecting young entrepreneurs like you with the tools and people you need to grow your business and keep it thriving. With our help, hundreds of companies have moved beyond the stage of the small business into a fully established and thriving company.