The following compiled list of mistakes that small businesses need to avoid will help you improve your business’s financial position. When these common mistakes are avoided, you will be able to save time and money while also maintaining your books in order.
Not Knowing Your Expenses:
This is one common mistake small business owners tend to make. They often encounter problems with cash flow and budgeting as they are not aware where their money is being spent. As cash is often forgotten during busy planning phases, it is best to track cash–based expenses every now and then.
With cash tracking, you can get a clear picture as to the cash flow affects the balance sheet, thus solving the high–pressure small businesses tend to fall when they are asked to pay to their suppliers on a sudden note. Paying attention to bank statements, cash receipts and documentation are the key requirements to know where you’re spending your money.
The records of cash tracking not only provide insight as to where the cash comes from into business but also provide information on all of the business’s cash outflows. In order to gain better control over the cash flow and to keep a closer eye on the overall financial position, it is essential to accurately describe the cash expenses of one’s business.
Cash flow when unmanaged is easily forgotten. This lack of awareness puts small businesses into serious consequences. By regularly checking your balance sheet and bank statements, cash tracking can be made simple, yet effective as this will help small businesses to avoid cash shortages during the time of payment to their suppliers.
No Stock Management:
Tracking the inventory that comes and leaves the business’s premises is essential as it helps to determine the availability of stock for the customers and if any additional purchases of stock need to be made. When this is left undone or done abruptly, generating accurate financial statements is not made easy.
The data obtained from financial tracking is essential for understanding the profitability of the business. Tracking inventory is made easy with the availability of adequate software and bookkeeping services. With proper tracking comes great advantages such as – gaining better visibility into the product stock, insight on the sales figures and making more profound decisions regarding profit and loss statements.
Unreconciled Transactions:
If the business needs to remain financially healthy, reconciling the accounts is one such task that needs to be followed. Reconciling the accounts ensures that all the financial transactions are accurately recorded in the books as well as in the bank accounts. Bookkeeping software can be of great help as it automates most of the bank reconciliation tasks.
Reconciliation of accounts is made easy with the help of accounting software as financial information flows in from different financial activities. Data obtained from these tools ensures that you have access to reliable financial information which can be used for planning and budgeting decisions.
Late Wages to Staff:
Small businesses need to keep track and ensure that their employees are paid on time. Late payments or no payments puts the small businesses into facing legal or financial consequences. The cons of late payments include bank fees, and being liable for penalties due to failure of tax returns. As employees expect to be paid off on a regular basis, it is vital that small businesses maintain a bookkeeping strategy when it comes to salary expectations and payment cycles.
Small business owners must be aware of the importance of managing their finances to keep their employee content. A great tip would be to consider accounting for these tasks in your accounts payable as you will always remember.
Business Without Budget:
Small businesses should make it a point to have a clear and achievable budget as it is beneficial to the business in many ways. Not having a proper budget can create consequences and leave the business in a scrambling situation to get the finances back on track.
Managing the finances is time – consuming and at times challenging but failing to maintain your books will make it difficult for the businesses to keep track on the cash flows and financial data and may also end up making late or no payment at all to their employees. This would put the business’s morale and productivity at stake, which no business would want. This can be avoided by maintaining and tracking your finances and ensuring to have a proper and achievable budget for the business.
Credits:
Naveen A
OSS & BK Team
