Financial mistakes should be avoided at any cost during the journey of doing business as little errors can lead to cash flow problems. It is also suggested to brush up the financial IQ for those who are not savvy in accounting. However, below are some basics to take care before it turns up to be a great mistake.
It is usual practice to put off the bills until the last minute. This applies to business owners too in both the cases – payables as well as receivables. It is good to give extended window to your clients while billing. They will appreciate such flexibility, but seriously it will cripple your cash flow. It is suggested not to give more than two weeks time to pay the invoice. For those who provide high quality services or goods, this won’t be a problem.
Similarly, while paying your own bills it is important to pay early as waiting for the last minute may sometime miss the date and land you paying with fines. Missed payment may also harm your credit score.
For every business houses it is important to maintain emergency fund as you may never know what could come across. Unexpected hurdles should always be considered as a part of business. It is suggested to at least maintain a three-month emergency fund.
No matter what is the size of your business, it is important to segregate the incoming payments to emergency fund too. Most of the startups fail due to misuse of funds or lack of capital.
Business Fund vs Personal Fund
There should be difference between business fund and personal fund. Both should be segregated. Putting lives on business line should be a big no for smaller businesses. It is important to separate business finances from personal fund while starting a business.
For new businesses it is important to open up a business bank account as well as to apply for business credit card too. Avoid using business credit card for personal expenses or vice a versa.
No High Spending On Non-Cash-Generating Activities
This is true. No need to spend too much of time and money on non-cash-generating activities. This will ruin your core business. Everyone has 24 hours and it is you who need to decide whether to work smart or invest more time with less output. Identify what will bring tangible value to your business. This will help you to succeed in your business.
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