Costly financial mistakes to avoid as you grow your business
November 9, 2018
Article courtesy Gordon Advisors PC
Business mistakes can take on various forms, but one of the most significant is in the financial arena. A substantial error poorly managed can create problems. Excellent decision making is necessary to anticipate and prevent these mistakes. To best protect your business, know and understand these mishaps. Here are several that you should recognize before they affect your business.
Committing Accounting Errors The work you invest in at your business is significant to its success. However, a simple mistake in accounting can derail your projects and leave a negative impact on your company. Be diligent in knowing your accounting system and making sure the information gets reported accurately. Not only can a proper accounting system help you make further decisions on spending on projects or hiring personnel, but it also gives you the control and organizational structure that will contribute a lot to the rest of your business development activities.
Ignoring Taxes and Federal Obligations One of the most critical responsibilities in financial management involves federal debts and obligations. The federal authorities will always have to get paid, regardless of your business condition. You can set aside a monthly tax savings account or delegate at least 25 percent of your profits set aside to cover tax expenses – these include payroll and sales taxes as well. Also, avoid borrowing from the government when you can, as excessive borrowing can result in increased interest as well as the risk of incurring penalties.
Making Unnecessary Expenses Savvy business owners do not buy items that do not foster productivity or that increase financial burdens on the business. Also, making these expenditures can also dampen your relationship with other stakeholders such as shareholders, employees, and partners. If you want to maintain your company’s financial stability, avoid unwise spending and only invest in what will generate a good return.
Not Prioritizing Cash In some cases, outstanding debts or unexpected expenses can strike your business. Therefore, having a reasonable amount of cash reserves is going to be helpful. Also, think of ways to sustain your business while borrowing as little as possible. Before you take on any loans, consider other avenues for getting the resources you need to initiate a project. Whether you have private money sources or can barter for services, you should explore these options first. You may find opportunities to save costs by looking outside the box.
These are some examples of mistakes that can hurt your business, which can take a toll on your business that is difficult to reverse. Your business is your lifestream, and any financial mistake should not have to be a detriment to your long-term success. To protect the future of your business, be mindful of these mistakes and make the appropriate plans to reduce the risks of them occurring.