How to dodge common Financial Mistakes made by small businesses
Today, small-scale businesses are on the rise. With innovations and technology, business ideas are easier to develop and implement. However, there’s no guarantee that your business will succeed – not every company launches deals like Spectrum mobile plans and sees instant success. In fact, most small-scale businesses fail because they fall prey to financial blunders. Don’t be a part of this majority. Learn how to avoid making these mistakes in 6 easy ways.
Keep Your Business and Personal Funds Separate
A lot of business owners make the mistake of combining their business accounts with their private ones. This seemingly harmless act is monumentally disastrous for businesses. Firstly, it’s never a good idea to merge money coming from different sources. Separate accounts are important for separate spheres. If combined, they can lead to confusion and mishandling. It is mostly sole proprietors who make this mistake. Large-scale businesses are obligated, by law, to isolate funds related to business. But no such role applies to small-scale companies. Thus, it’s easier for them to get away with this even though a merge can raise red flags with the authorities.
A separate bank account will help by:
Making bookkeeping easy
Simplifying the task of doing taxes
Building more financial transparency
Decreasing personal liability
It’s easy to get carried with aesthetically pleasing stationery and furniture. But don’t let mass consumerism sway you. Stick to your budget strictly. Most small-scale companies crumble because they spend too much on inconsequential material things. They also think an excess of this will make them stand out from their competitors. Yes, basic decent infrastructure and technology are important. But don’t spend at the cost of your business’s future. Build cost-effective solutions and follow them thoroughly. And don’t worry. You’ll soon have the money to buy that latest printer for your workspace.
Be Smart About Insurance
Business insurance is very important. In fact, it is crucial for the safety and survival of small-scale companies. So, make sure your business is safe and well insured. Unfortunately, many properties fail to choose the best fit for their company. It is very easy for insurance companies to rip you off. They charge higher prices just because they can. So, make sure you compare prices frequently to avoid paying extra. According to Investopedia, these are the best small business insurance companies of 2021:
Best Overall: State Farm
For Independent Contractors: Hiscox
General Liability Insurance: Nationwide
Workers’ Compensation: The Hartford
Best Commercial Property Insurance: Travelers
Business Owners Policy: Liberty Mutual
Best Commercial Auto: Progressive Commercial
Let’s face it. Everything is easier when a machine does it. Manual budgeting doesn’t do the trick anymore. You need an app that sends you notifications, reminders, and alerts to let you know about your financial status. This will also make it easier for you to see how and where you spend your money so you can cut costs next time. These are the top 5 budgeting apps as stated by Cnet:
Mint (suitable for in-depth budgeters
You Need a Budget (for complex and intense budgeters)
PocketGuard (good for simple budgeters who can’t afford YNAB)
Goodbudget (suitable for basic budgeters who enjoy a manual and personalized style)
Personal Capital (best for investment and retirement-focused budgeters)
Plan Tax Obligations
Business owners have to prepare for taxes all year round. There’s no escape. Even for small business owners. You need to be well prepared before your tax arrives. If not, you’ll end up confused and shorthanded. Tax preparation isn’t something you can do at the last minute. Therefore, putting a certain sum of money aside for tax bills is important. However, it is even more important that you don’t touch the amount you’ve put away. If your budget allows you some leverage, hire an accountant. If you’re unable to do that, use resources like the internet and your nearest bookstore. But whatever you, ensure sufficient preparation. Tax irregularities are the easiest way to drown businesses.
Have an Emergency Fund
In unexpected times, it is important to have something to fall back on. Businesses often make the mistake of not establishing an emergency fund. This is what helps you regain control. These funds are basically savings that act as a safety net.
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