6 MONEY MISTAKES SMEs MAKE THAT THEY MAY ONE DAY REGRET

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Of all the roles new business owners need to take on, dealing with accounts and keeping records are tricky. Also, poor decisions can also cripple your business.

A basic piece of maintaining a fruitful business is real forecasting. Surviving the intense first years is simpler when things like income and costs are forecasted, alternate courses of action are set up for things like insurance-related occasions that can’t be predicted.

The advice might look simple, but small business keep making the same money mistakes over and over. It later becomes an issue down the road.

HERE ARE SOME MONEY MISTAKES SME OWNERS OUGHT TO STAY AWAY FROM NO MATTER WHAT.

BUDGETING

Planning is basic. Besides the fact that it helps you deal with your expenses, it additionally guarantees that you have enough money set aside for recurring neglected expenses, like tax and insurance.

It likewise gives you insight into where you can reduce expenses.

SEPARATE BUSINESS AND PERSONAL ACCOUNT.

Another money mistake to avoid is not having separate accounts for your business and personal use even if you haven’t registered your company.

You can start by having a bank account solely for your business. You can track and monitor salaries, expenses, income. Monthly finances would be done quicker.

CASH-FLOW

Your cash-flow is connected with your budget. Most SME’s mistake cash-flow and sales. You can have multiple requests or orders, until you get paid for those requests, you are expected to cover all the costs e.g. taxes, utility bills, wages—from your own pocket.

To encourage prompt payment, issue invoice as soon as orders has been placed. So, avoid the money mistake of not encouraging prompt payment.

A cloud-based accounting software will handle this for you, including tax compliance, payroll, invoicing. Also have flexible payment terms and platforms.

EMERGENCY FUNDS

In an ideal condition, have emergency funds that can handle at least three months of expenses. This should be kept in an account you can easily access or an investment account so you can even earn interest.

Emergencies occur in each business. Ensure, you’re prepared by putting contingencies in place. I’d advice you have this set up to avoid another money mistake.

BE MONEY SMART

As a new business, you’d like to get some purchases on behalf of the business, but you need to smart about it.

A good way to measure whether you need to make that purchase is by asking yourself what kind of immediate value it will add or if it will generate revenue. If the response is “no”, don’t buy it.

Also be smart with

·       Whether you need an office space or you can just work from home.

·       Be good at record keeping or get a software to handle it for you.

·       Issue receipts and invoices immediately.

BORROWING

A timeless financial wisdom is never to count your eggs before they hatch.

On the off chance you need funds in the anticipation of future revenue, you can borrow but it is not advisable. You can quickly enter debt you might later regret, this can also make credit unworthy with your lender.

A good rule of thumb is: don’t spend money you don’t have.

But if you want to have more funds and considering borrowing. Experts say, the best time to borrow money is when you don’t need it as this makes credit worthy with lenders if you truly need it.

REFERENCE: Sage.

Tijani Olayiwola Ahmed: