There are potential risks involved in running a business. Like most entrepreneurs, you recognize limits, identify opportunities, cross boundaries, and you are an excellent problem solver. Sometimes, however, you are exposed to making mistakes, some so dumb that you never thought you’d ever make them. Some errors can be corrected quickly, while others will cost you money or burn the house down. Here are four common mistakes that will cost your business money.
1. Underestimating cashflow management
Most businesses are paid after twenty-one to ninety days after offering a service. Between this period, you can lose many jobs if you don’t have money to keep your business moving. You still need to buy materials, pay staff, and clear your bills if you want to remain operational. With an invoice, you can get financing from your banks or use invoice factoring to get 70 to 90% of your invoice value. This strategy will cost you some money, but it will give you the cash flow you need to take on more business and rank in more profits.
2. Not taking out insurance early enough
Most entrepreneurs, especially during the early stages of their business, ignore the importance of covering their assets. You may end up in financial quicksand if a lawsuit was thrown your way, losing money, and in the worst-case scenario, your business. According to dot2dot nursery insurance, trouble never arises from the cover you have, but from the loopholes in that cover. It’s essential to cover all your bases with either general liability or with different policies that cover different needs. Even when you are tempted to keep your costs low, do not compromise on the importance of full coverage because when a lawsuit strikes, you will suffer more financial damages.
3. Not separating your business and personal accounts
It’s easy to move money from your own account to your business account and vice versa. Although it’s an acceptable way to grow your business account and access credit down the line, this strategy can prevent you from seeing the real financial picture of your business and get in trouble with IRS for inappropriately using business funds for personal use. Having two separate accounts will shield your credit score if your business fails in the future.
4. Incurring debt with the expectation of future revenue
When the business starts doing well, you might be tempted to spend some money as you wait for sales to come in and cater to the loan. This is the worst financial mistake to make, yet it’s not uncommon, especially with credit cards. Wait for revenue to hit your bank before you make any significant purchases when using your credit card. You will train yourself to use your card prudently and only for what’s required.
Start saving for hard times and emergencies, learn your tax obligations, and have a clear business budget. Remember that all big businesses started small, so grow wat your pace ad focus on delivering value to your customers. With time, you will learn how to mitigate risks and minimize common business mistakes.