What financial mistakes do small businesses make?
Every entrepreneur learns from mistakes. However, some issues, such as financial, are a priority. How to protect yourself from bankruptcy of the company? Learn about the financial mistakes that novice entrepreneurs most often make - see what to avoid.
A company financed by a loan
Every company needs capital to start - the only difference is in its amount. Depending on the business profile, even 1000 PLN may be enough. However, funds for a start are not everything - savings are also important. Thanks to the financial cushion, the owner of a small business can fully concentrate on developing the business, without the need to cooperate with every entity or client that applies to him.
However, not every entrepreneur has the comfort of a financial base. Many small businesses start their business on credit, while others take out loans and credits in the first months of operation. Meanwhile, each credit or loan is a burden on the monthly budget of a small company. How do I get out of this situation? Entrepreneurs who do not have funds to start should think about an alternative to a loan in the form of, for example, a non-returnable subsidy.
Little resources, big investments
Investing all earned funds is an equally serious mistake that a small company can make. In such a situation, the entrepreneur not only gets rid of savings, but also can easily overestimate his possibilities. Even a short crisis in the industry is enough for the specter of bankruptcy to be real. How wisely should a small company invest?
Small-scale operators should never spend all earned funds, but only a predetermined proportion. Instead of involving your own resources, you should also think about other solutions. The cars needed by the company to achieve its goals can be obtained through leasing. This solution is very popular among entrepreneurs due to tax benefits.
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No border between own and company funds
Self-employed entrepreneurs often make the mistake of treating the company's funds as their own and private assets as corporate assets. Even in the case of a small company, it is worth making sure that private and corporate funds are separated. This will allow you to manage your home and business budget even better.
Separating private funds from company funds is favored by paying remuneration to the owner of the company. If the entrepreneur uses a corporate credit card, he should account for all expenses. This arrangement also prevents the occurrence of occupational burnout. An entrepreneur using the money earned can use it for his pleasure, thus taking care of the work-life balance.
No monitoring of receivables
In small companies that do not have an accounting department, it is easy to neglect the monitoring of received payments. If the owner does not check whether his contractors are paying their liabilities on an ongoing basis, he cannot react quickly. As a result, he runs the risk of not getting his money back, which in turn will lead his business into serious financial problems.
Controlling payments does not have to be tedious. In this regard, the entrepreneur can be supported by a good invoicing program, which will also allow him to send payment reminders. To keep your company's finances under constant control, it's best to set aside one day a week to check your bank account and send reminders to customers.