For all business owners, no matter whether you run a cafe or a consultancy firm, the importance of managing your finances effectively cannot be overlooked. One of the best things you can do is learn from the mistakes that other people have made. With that being said, continue reading to discover more about the common money mistakes businesses make so that you can avoid them.
Not setting a clear budget for your company
There is only one place to begin, and this is with failing to set a clear budget for your business. The importance of this cannot be overlooked. After all, if you do not set a clear budget, you will not have an understanding regarding the cash you have available, which could mean you end up running out of it! From courier car insurance to your maintenance expenses, you need to include every cost in your budget, no matter how big or small it may seem. This is the only way you can get a true understanding of your current business position.
Failing to save for emergencies and lean times
The second mistake that a lot of business owners are guilty of is failing to save for lean times and emergencies. A lot of people call it saving for a rainy day. Irrespective of what name you give it, there are going to be times whereby something happens that causes an unexpected negative turn for your finances. This could be a data breach, for example, or it could be a loss in sales for something that is out of control. To ensure your business survives through this difficult patch, you are going to need to have a reserve of money. The vast majority of financial planners advise business owners to make sure that their contingency or emergency fund consists of a minimum of three months worth of expenses.
Mixing your personal and business finances
Last but not least, another mistake that a lot of business owners make is mixing their personal and business finances. This can result in a lot of confusion because it makes it incredibly difficult for you to manage your money. You don’t know what you have spent on business matters and what has been spent on personal manners. Furthermore, it can also lead to a lot of trouble for you if you end up being audited by HMRC. They will ask to see all of your statements and they may assume that you have purposely mixed your finances for tax evasion purposes, which can result in a big fine.
As you can see, there are a number of different mistakes that a lot of business owners make when it comes to money. Hopefully, you now feel more confident when it comes to managing your company’s finances. From setting a clear budget to ensuring you keep your personal and company finances separate, these changes can make a big difference when it comes to the financial management of your business.