It’s a fact that an enduring and successful business hinges on the effective management of Financial resources. Yet many start-ups and small-to-medium enterprises fail to manage their operations’ Financial aspects effectively.This results in operational struggles or, worse, bankruptcy. What causes such finance-related incidents to happen?
1. Mistaking Profit for Cash Flow
Profit is earned when all expenses have been accounted for and funds are still left. Cash flow is the amount of cash coming in and going out of a business. A company may appear profitable on paper, but its cash flow is out of control, which can lead to insolvency. To be considered financially stable, a business should have positive cash flow and profit margins. Implement strategies to triple your small business profit, but manage cash flow effectively as well.
2. Mixing Personal with Business Finances
When it comes to finances, business and personal should be kept separate. This makes it easier to keep track of business expenses and simplify tax reporting accurately. Your assets are also protected against business liabilities if they have their own bank accounts and credit lines.
3. Overlooking One-Off Expenses
It’s easy to forget that you spent on special projects or equipment repairs if they’re not done frequently. Failure to anticipate or record it can disrupt your financial plans. Even if they are unexpected expenses or irregular costs, they should still be included in your budget. To avoid unpleasant financial surprises, use expense management software to help you accurately keep track of and document infrequent expenses.
4. Failure to Monitor Finances Regularly
What better way to identify if there are undetected issues or missed opportunities than to periodically and consistently review financial statements? It’s the best way to see where you’re spending more, spending less, and where to cut back. Your financial statement will also indicate the fiscal health of your company. Is your business going on an upward or downward trend? Make sure to check your financial statement routinely.
5. Inadequate Tax Planning
Proper tax planning is the best way to maximise returns. You can claim deductions or get tax breaks where possible. But you need to know all about your tax obligations beforehand to enjoy such privileges. Doing so will also protect you against tax liabilities and compliance problems. Consult with a tax professional for advice on proper planning.
6. Lack of a Comprehensive Budget
A detailed budget serves as a map that will help you navigate through the ups and downs of the financial landscape. You can set realistic financial goals and make the proper spending and budgeting decisions. So ensure you have a comprehensive budget, stick with it, and update it regularly.
Anyone can fall into a financial trap. With a better understanding of the various aspects of business finances, from profit and cash flow to tax and budget, you can keep your business afloat even if there are challenges ahead. ExpenseMe provides effective end-to-end solutions to help you avoid business problems. To help maintain the fiscal health of your business, partner with a reliable provider of expense management solutions. Contact ExpenseMe today!
