Running is business is not an easy task. There are many small business mistakes that are often committed by business owners. Most of them think that investing all the money and working hard is the key to a successful small business. But gone are the days when hard work was solely important to run a business. Now business owners are required to not only work hard but work smarter as well. Or the growth of the business can be hampered.
There are a few other dangerous small business mistakes as well that can directly or indirectly impact the business and finances. Fortunately, there are a few steps that can keep the businessmen away from committing those mistakes. Let’s take a look at the four commonly committed small business mistakes that all business owner must avoid at any cost.
Not Separating Business & Personal Expenses
It is not easy to separate and personal funds especially in the early stages of the business when the business completely relies on personal funds. However, not doing so in the long term can create problems for both, business and personal finances. So, once the business takes off, the business owner must put some effort to separate the finance.
An effective way to do so can be opening a separate bank account for business or using a credit card for business transactions. Doing so will also help in avoiding tax problems and bookkeeping. Also, separating personal and business finances will empower the business owner to evaluate the business finances in a better way. And also in finding solutions to potential cash flow issues that may arise later.
Not Creating a Budget & Following it
Budgeting seems a hassle to most people. But when a business is concerned, not creating can be one of the biggest small business mistakes. A budget will help in making informed decisions about everything, from purchasing inventory to staffing. On the contrary, when there is no budget, these tasks become more challenging. Also, it can also lead to the business run out of cash. This, in turn, becomes a necessity for a seasonal business. The business owner will need to maintain cash flow for months will lower sales.
Also, there are some small business owners who do create a budget but do not strictly follow it. This is also a big mistake often committed by small business owners. There are few Apps available on the Google Play Store that help the small business owner in creating and maintain their budget. These apps will help in keeping a track of the expenses and review the financial performance of the business.
Not giving due Importance to Credit Score
When it’s time to avail a loan for business, a credit or CIBIL score is the most important thing. It determines if the business owner is a qualified borrower or not. Firstly, credit history impacts the financing options, such as credit from supplier or vendor. This arrangement helps in parring the time of low cash flow. Also, a high credit score can lead to low business loan interest rate.
Not Availing Business Loan at the Right Time
Working capital is very important for a business to run and grow. And when cash flow starts to run low, a lot of issues may arise. Many bills may go unpaid which can lead to low credit score or burden the business owner with high bills to pay. This situation can be challenging and may result in a shortage of inventory and therefore, its supply in the market. This ultimately will affect negatively on sales and revenue.
For this and many other reasons, it is important to know the right time to avail a working capital loan for a business. Not availing it on time is certainly one of the biggest small business mistakes.
Not each and every situation can be imagined and can be written down here. It is important to plan for every potential scenario that can hurt business in a negative manner. So, adopting a proactive approach will help in dealing with every situation like a pro.