Small Business Finance Mistakes

When you are in business the whole idea is to make a profit. Without a profit your business will go down the tube. This will even happen sometimes when there is a profit if cash flow is not seen to. While most people who run a business – especially a small business – are good at what they do, some of them are not good at managing money.

Good small business finance management is critical if you are to stay in business. Here are some mistakes that people often make in managing the finances of their business.

  • They often buy things their business really cannot afford, using a credit card. They then have to pay a great deal of interest on top of the purchase price. Rather than paying out all this money, consider other options such as buying second-hand or even doing without until the business can really afford it. Even getting a small loan will give you a better interest rate.
  • Most business owners have a transaction account for their business and this is good, but you also need to have another account with higher interest so that you can make more money from your profit. Leaving money on the table by keeping all the business money in an account that offers little interest is just plain wasteful.
  • Many business finance mistakes are made because the owners do not track their expenses. They have no idea how much they are spending or whether all the invoices have been paid. When you don’t know where all the money is, how can you know how much you have to spend? A monthly budget is a sensible idea and will help you to plan for the future.
  • Trying to do everything when you are not good at doing it is another mistake many business owners make with their business finance. Outsourcing certain chores such as accounting may seem costly but it will free up your time to do what you do best – run the business. Besides which, when you try to do things for which you have no training, your mistakes are likely to cost you more than outsourcing fees would have.
  • Trying to look flash can cost you more money than you should spend on your business. While the latest design in office furniture and fittings may look wonderful, it does not really bring in the money. Your customers will be more interested in whether you offer them value for money and treat them with respect.
  • Not learning from your mistakes can also be a costly exercise. Many business owners simply don’t seem to see where they went wrong the first time and they do the same thing over again, expecting to get different result. This is a form of insanity, according to some people.
  • Not asking for help is a big mistake in business. Flying solo is more difficult than taking on board a mentor or two, especially when much advice can be accessed for free from government agencies. A mentor can help to keep you going and show you where your worst mistakes are if you cannot see them for yourself.

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Small Business Finance – Advice for When the Money Is Rolling In

Today, more small business CEO’s who have been hit with financial challenges are applying personal finance basics to the business arena. Here are five money management habits to apply in business and personal finance.

Don’t Overextend Finances

In business this can show up in the form of excess inventory, high labor costs, and assets that are not being utilized for good returns. Small business owners may find hidden costs by reviewing bank statements regularly and monitoring investment portfolios for those that are doing poorly.

Know the Breaking Point

The breaking point is where you begin to veer off course. For some this means a constantly overdrawn bank balance or others experience creditor harassment. Instead of paying down debt, you might avoiding making payments until more money arrives. Other signs to watch are a high debt-to-income ratio, consistent business losses, and warnings from your money manager that its time to increase income or forego the lifestyle you desire.

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Small Business Could See Trouble If Congress Doesn’t Raise the Roof

According to the Constitution of the United States of America, Article 1, Section 8, Congress has the power “to borrow money on credit of the United States.” Congress has since established an agreeable number on somewhat of an autopilot system and has increased this cap on debt 74 times since March 1962. This number called the debt ceiling is the total amount of debt the federal government can legally borrow.

Currently, with the outstanding recent increase in our Nation’s total debt, some members of Congress are unwilling to vote for an increase to the debt ceiling without some sort of agreement on spending cuts. This is where the problem begins.

On May 16, we passed a milestone and our debt ceiling of 14.2 trillion dollars. Currently we are spending against federal workers pensions until an agreement can be made in Congress to increase the debt ceiling, drastically reduce spending or default on payments.

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