Money is the lifeblood of all business. It might not necessarily be your goal, but you better believe it’s required to reach it. Yet there are a lot of very talented, bright businesspeople who go into business based on an idea or a skill they know they can sell, but with little knowledge of what financial considerations are required. If you’ve never considered these risks before, it’s time to start implementing that knowledge into how you run your business.
Not keeping track of your cash flow
As soon as you have money that’s dedicated to the business, start keeping track of your cashflow. Keep a running a calculation of all the incoming funds and outgoing expenses. Track how much of your money goes out and where it goes out. Costs can very easily creep up in business when you’re not paying the kind of attention that you should be. You should be tracking accounts receivable and accounts payable, too. That is, what clients and customers owe you and what you owe suppliers. The cash in your possession alone doesn’t always give the most reliable overview of how well or poorly you might be doing.
Overspending on resources
One of the most common mistakes a business will make from time to time is overspending on resources. It’s more efficient to use fewer resources, we all know that. But many businesses will buy more to begin with in order to be supplied for a long time in the future. But doing that isn’t just costly in the short-term. It also means you have to keep bigger ongoing costs for keeping that inventory.
Getting your taxes wrong
Your first tax season as a business owner might be a dreadful experience. There are few people who enjoy doing them. But it can be made even worse if you get it wrong. For instance, if you pay less than you should, even inadvertently, you might be subject to a long process of audits that will be even more invasive and disruptive. Otherwise, you might pay too much. Until you get a good grasp on deductions and what you owe, it’s a good idea to seek out help like a tax consultation to ensure you’re doing your taxes accurately..
Missing your payroll
If you have employees, then you have to absolutely nail down a reliable payroll system. Missing their payments isn’t just bad form, it can get you in a lot of legal trouble. They have a right to get paid exactly to the letter of their contract, after all. New business owners might play fast and loose with a lot of finances, but that is most egregious when it comes to your employees. Make sure you have the funding necessary for the next pay date immediately after you’ve paid out the current one. You can even automate payroll if forgetfulness is your problem.
We hope these tips have shed some light on how to protect your business financially. It’s absolutely vital that you start taking your finances seriously. No business can afford to wing it when money is involved.
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