Financial issues are one of the biggest challenges that you need to deal with, especially when starting a business. These things can become huge stumbling blocks that may be critical to the success or failure of your business.
Improving the financial position of your business can be a struggle! But hey, most startups if not all, go through similar complications before they made it up the ladder of success. So you need to focus on managing your company expenses and cash flow to avoid financial difficulties.
This article will walk you through the financial woes that strike most start up businesses.
1. Inconsistent Cash Flow
Having an inconsistent cash flow is a big problem. If you’re a project-based business, then cash flow consistency is very important. You need to have a marketing team that will continuously look for new projects , to keep the cash flow running!
On the other hand, non-project based businesses need to focus on repeat customers because these recurring clients will help keep the cash flowing. That’s why, it’s always a must to have marketing promotions on a regular basis to keep satisfied customers coming back for more!
2. Not Enough Capital
Every startup business needs the right amount of capital. It is important to have at least 6 to 8 months working capital to avoid a financial burnout. This is essential, because you need all the breathing space you can get to focus on acquiring new customers.
If you don’t have the capital to last you at least 6 months, then you are in deep trouble. This is something that you need to avoid especially when you are just starting out. Not only is this a bad business habit, but inevitably it will stretch out your stress levels way up high.
3. Paying Bills Late
Do you pay your bills late because you don’t have enough cash? If it’s a cash flow issue, then you need to look at marketing options to increase ROI thereby improving the flow of cash that comes into your business. Otherwise, you need to make a monthly budget and stick with it.
It is best to choose a specific day of the week, to sign checks and go through your accounts payables to track their due dates. Setting a budget is one thing but sticking with it, is the most strenuous part. Discipline yourself to not go over your budget because this will help you in the long run.
4. Unorganized Bookkeeping
Small business owners usually fall flat on their faces when keeping records as this is a boring task. Late bill payments often occur as a result of poor bookkeeping. This is a bad business practice that needs to be avoided because it could lead to poor commercial credit rating and if the IRS decides to audit you can be in hot water.
What you can do is hire a full-time bookkeeper or if not outsource your company’s bookkeeping jobs to save on costs. Bottom line is you need to maintain and keep your financial records up to date.
5. Never Mix Business & Personal Expenses
Avoid the temptation to mix your personal and business expenses and financial records. Many small business owners have a tendency to do this practice by not having separate bank accounts. So it’s not a surprise that most businesses who do this, experience challenges in bookkeeping.
But any business regardless of its size can greatly benefit from separating their personal and business funds. Furthermore, mixing of funds can raise red flags for anyone who’s assessing a company’s finances.
Overall, managing finances is truly crucial in any business. Yet it all starts with developing good habits.
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