Common Financial Mistakes Made When Running a Business

34e8fad0 318e 4802 b53b74f3a77db958 - Common Financial Mistakes Made When Running a Business

Running a business can be an exciting time, but it can also be a complicated one. As well as ensuring that you have what you need to run the business, you also must ensure that your business is prepared for any forthcoming financial obligations, which can present themselves in different ways.

A business can only be a success if the right steps are taken, especially from a financial standpoint. As such, it can be useful to know some of the consequences that can occur if we’re don’t have the necessary capital in place at the right time.

Irregular Bookkeeping

When we first start in business, it can be tempting to leave the more mundane tasks until later on, and this can include ensuring that the business accounts are up to date. Although some may not consider this an urgent task, the business could soon suffer if it’s not able to establish what its current incoming and outgoings are.

Regular bookkeeping not only ensures that your current financial commitments can be met, but also allows you to make plans for any future financial commitments, ensuring that the business doesn’t have to come to a standstill because the necessary funds aren’t in place,

Not Planning for Upcoming Tax Obligations

As the paying of taxes can be sporadic, it’s easy t assume that we can catch up with tax obligations in the future, but the longer it’s left, the more pressure the business will be under when it comes to that all-important due date.

As taxes can come in at sporadic times, it’s best to come up with some sort of system that allows money to be set aside on a monthly basis. Of course, there will be times when the amount is more than the business expected but having a majority of the funds available avoids unnecessary panic.

Overpaying of Taxes

Although underpaying taxes can be problematic, so can overpaying them. The reason many people pay too much tax is because they have failed to keep tracks of their expenses. This could be due to irregular bookkeeping but could also be due to not keeping receipts. Regardless of whether it’s a new laptop or a jar of coffee, if it relates to the business you need to ensure that the business is claiming the tax relief available.

While these amounts may not seem like much at the time, they can soon add up over time, and could make all the difference to the bottom line of the business.

Not Keeping Personal and Business Accounts Separate

If we’ve not got around to opening a business account, then it’s likely we’ll be using a personal account in the short-term. However, the longer we leave opening a business account, the more confusing out finances become.

Not only does having a business bank account offer more clarity when it comes to paying taxes, but it also ensures that we’re not using personal money for business use and vice versa.

Having both our personal and business income in one account could mean that overspending has a detrimental effect on either aspect of our life.

Employing of Staff Before Carrying out Research

People will have different outlooks when it comes to running a business, and some feel that hitting the ground running is the best approach when it comes to ensuring the business is a success. However, not taking the potential pitfalls that could arise into account could means that you’re cutting staff roles as soon as you’ve filled them. Not only does this disrupt the business, but the personal lives of others. Of course, there will be times when difficult decisions have to be made but carrying out research will ensure that there is damage limitation in place and you wont require a bad faith lawyer houston, even during the hard times.

The factors to consider can vary on the niche of the business. If you’re running a small store, then how many staff can you employ, while still ensuring you can meet other requirements. Are you filling roles simply to make the company look busy? The employing of staff is a expense that if managed in the right way can bring a lot of benefit, but shirking away the research could mean that any investments cause detriment to the company’s profits.

Pricing Products or Services Too Low

The introduction of the Internet means that more budding entrepreneurs can start a business with a relatively low budget. However, the abundance of businesses means that some businesses can worry that their service will be overshadowed.

This can often mean that companies look to lower their prices and hope this attracts more business, but this can only do more damage to the company’s turnover.

When promoting a service, it’s important to showcase its value and what benefits it offers the customer. Simply lowering the price of a product or service could mean that customers devalue the service.

Pricing Products or Services Too High

Just as a company shouldn’t undersell its products, it shouldn’t look to profit on unsuspecting customers. Although there may have been a time when companies could prey on the less-informed, nowadays customers are able to research a product in a manner of seconds.

Although they won’t be looking at the price alone, anything that’s priced unrealistically will often be ignored. As such, market research is key. For example, there may a cheaper version of your product available, but it may not yield the quality or benefits of yours, so the price difference isn’t going to shun potential customers.

When running a business, it’s common practice for mistakes to be made, but this doesn’t mean a business should just allow them to keep happening. Making the changes and scheduling  your admin can mean that there are less forks in the road when it comes to running a successful business.

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