Money: it’s great when you have it, it’s not so great when you don’t. And while this is true for your personal life, it’s true for your business life too. If you run into a cash flow problem, and you don’t have the means to salvage the situation, your business is going to suffer.
With the above in mind then, let’s look at a couple of money mistakes that could harm your business. Read them, heed them, and then take the appropriate measures to ensure the long-term survivability of your business.
Money Mistake #1: Not planning for taxes
When you were a full-time employee, you didn’t have to worry about your income taxes. Your employer sorted them out for you, and while you might have grumbled about them being taken out of your pay packet, at least you didn’t have to deal with the taxman.
When you’re self-employed, however, you need to manage your tax obligations. Not only will you need to budget for your own income tax, but if you have employees, you will need to budget for their share too. Any mistakes could lead you into financial trouble, especially if you haven’t accounted for your tax liability or if you face a hefty fine for not filing your return in time.
Tip: If doing your own taxes gives you sleepless nights, hire an accountant. They will estimate your tax bill ahead of time, and this should then give you the opportunity to budget accordingly.
If you do run into trouble with your tax obligations, perhaps because you have made a mistake or simply been unaware of what you needed to do, you can also seek legal help from tax experts who can tackle payroll tax issues, unfiled tax returns, and more. Our advice: seek help from both parties early to ensure you don’t get into difficulties with your taxes.
Money Mistake #2: Spending your profits early
When your business starts to grow, and you do start to make a profit, your temptation might be to spend spend spend! You might take on more staff, buy new equipment, and give your premises a makeover, as examples. This is all well and good, but you need to curb the temptation to spend your profits early.
You will only run into difficulty if you don’t, especially if you run into a shortfall the following month, or if you run into an emergency that requires you to spend more than you expected.
Tip: While it’s sometimes necessary to spend money to see business growth, you should still focus on two things. Firstly, make sure you put money into your savings and emergency fund before you splash your cash, as this will minimize the risk of you getting into financial difficulties during lean periods.
Secondly, save money by being frugal. Instead of buying high-end equipment, look for something second-hand or refurbished. Rather than splash out on an expensive marketing campaign, look for cheaper ways to promote your business. And use free versions of software packages instead of paying for expensive subscriptions. You can spend more when your profit margin is high, but when you are only just starting to make a profit, use your common sense, and curb your spending.
Business owners up and down the country are facing failure because of mistakes with their finances. You don’t have to suffer the same fate, so heed what we have said in this article, and then take further steps to research other financial errors that are common in business.
Thanks for reading.