If you commit these following financing mistakes too often, you will largely lessen the chances of long term business success. To become successful in your venture you need to think long term. Reputation and long term success in business are earned in due course. A consistent business track record is hugely judged on financial success and this business financial success is assessed largely by means of examination of the accounts. A good business account shows to financiers, banks, colleagues and more that you are a bankable business owner and will encourage them to put their money and trust to you as well as your future business ventures.
Through not committing any finance mistake, at the very least you will have good financial pointers and be capable of responding to the company’s financial position in time. So, the key here is to know both the causes and importance of each.
Finance Mistake #1: No Monthly Bookkeeping
It doesn’t matter if your business is small or big, imprecise record keeping makes all types of problems relating to planning, cash flow as well as decision making. Your trade is doomed when you aren’t doing monthly bookkeeping.
A bookkeeping service is dirt cheap in comparison to other costs a company will incur. Keep you accounts balanced regularly so you can see the financial status of your company like profit, loss, balance sheet and many others in real time.
Finance Mistakes #2: No Estimated Budget and Cash Flow
Having no significant bookkeeping makes a lack of knowhow on where you are. Also, without an estimated budget and cash flow the direction to where your company is headed is unknown. Without keeping score, a company is likely to stray more and veer away from its target. This invites an issue which eventually pressures the business to change it’s spending and cash management routine. An estimated cash flow should be realistic. You must project a worst case and best case scenario based on estimated business sales and expenditures. However, it is a smart idea to aim for the best case but also you must know how to respond in a worst case scenario.
Finance Mistakes #3: Insufficient Credit Control
There’s nothing like making sales, carrying out the work, sending a client an invoice and not getting paid on time, or worse not getting payment at all. A well established reality that the longer the credit is not collected the less possibility it will be collected. Usual credit terms in a established company are one month or 30 days, but because of a culture among some clients of paying later and small companies not imposing strict credit control, a company can often not get payment on time and run out of cash fast.
These financial mistakes can be avoided if you follow these 3 steps:
- Appoint a staff to be in charge of credit control
- Submit your invoices promptly and take in a statement of the account with each invoice.
- Reinforce the payment terms and condition on contracts
In the world of tightening credit from bank organizations, strict finance practices of business are needed even more. You cannot look forward to the bank to extend the overdraft or ease a term loan when you are following the three points above to avoid financing mistakes.
Have you ever found yourself in one of the Financial Mistakes listed above? How did you go about correcting it? What systems did you put in place to ensure you would not make that same mistake again? I look forward to hearing from you.