As a business owner, you face decisions on a daily basis. Some you make with a sold background of pros and cons, considering your facts, spreadsheets and factors involved. Others are fly-by-the-seat-of-your-pants decisions, made in haste or spontaneity. Quick decisions can't be avoided, but keep some of these proven pitfalls in mind to avoid money mistakes.
Costs come in all kinds of ways. Legal, taxes, fees, interest rates, raised rents, prices and unforeseen issues. When laying out a strategy for growth, launching a new product, adding on to your building, hiring new people or otherwise investing in your business, pad your estimates. Research your options and know when a service comes with an added fee or what you'll do if an addition takes longer than expected. Don't underestimate the need for a safety net.
Skimping on Organization
You make a quick purchase and stuff a receipt into your back pocket thinking, "I'll get to that later." Haphazard accounting practices lead to puzzles you simply don't have time to sit and figure out. Prioritize your accounts management, from your own expenditures to the receivables you earn. Develop a process for regular accounting practices so you're not left with a paperwork puzzle down the road.
Mixing your Personal and Business Finances
You notice you're going to be short to pay your part-time employee, or to cover that latest delivery of inventory, so the temptation may be to slide a little over from one account to another. Not only do you muddy the waters, but you make it difficult to truly assess the profitability of your business if you tap into personal finances when things are difficult. Look into short-term cash flow solutions or tighten budgets elsewhere to keep your business and personal finances apart.
Depending Solely on Credit
Credit is a staple for any business, big or small. Overdependence on credit places your business at risk, as you find fees and charges mount. Consider carefully each purchase you make on credit with the utmost care, and ensure you're following the business goals. Buy now, pay later can lead to trouble if paying later means simply adding to your credit line.
The "I'll Do it My Way" Mentality
Before going to print, newspapers, magazines and other publications enjoy multiple eyes. Editing is standard. When you're in business for yourself, you don't often have the backing of an editor to double-check your work. But you do have resources, including other small businesses, real estate professionals, small business counselors, lawyers and accountants who can lend their expertise. Build your own editorial staff and rely on the expertise of others before making big decisions.
It's easy to look back in hindsight and identify the weak spot in your financial armor; to see where a decision threw you off or a purchase was unwise. With tools, professional insight, and planning, you can avoid most money mistakes.