You can’t teach an old dog a new trick.
It is almost impossible – because it is adamant not to learn anything new and continues to do what it has learned in its early years.
Start-up business owners are like old dogs. Like an old dog, you would have picked up lots of habits. When it comes to finance, majority of them would be bad habits. If you don’t consciously look into those bad habits and find ways to correct them, it would severely affect your business. Let us look at some of these bad financial habits and ways to correct them.
Forgetting collections:
Ensure that your clients pay you on time. Outstanding debt list should be reviewed every week and followed up. Collecting debt is not something most people enjoy but time must be dedicated that you get the money you are owed. Otherwise your business will have survival problems.
Overlooking compliance:
A business has certain tax obligations from the first day of trading and not just when the business is profitable. It is important that a business is in compliance with the regulatory authorities. You must set aside cash to ensure that you have enough cash to pay for taxes. A business has to ensure tax compliance even if it is a sole proprietorship concern.
Not allocating enough money for owner’s efforts:
A common mistake that businesses make is forget to include founder/owner’s time and effort while calculating the revenue or profits. In order for a business to survive it must generate enough money for the owner to live off and then make enough profits for future investment.
Inappropriate inventory purchases:
If your businesses sell goods it is crucial that you avoid carrying too much inventory or too little inventory. Too much or too less inventory costs money or lost business. Negotiate your purchases carefully so that you maximize the money you spend. Calculate profit margins frequently so that you can find out if your inventory is purchased effectively.
Not preparing cash flow budget:
Cash is the king for any business. Without cash you cannot pay your staff or suppliers who are essential to run your business. It is important to accurately keep track of your cash flow. The best way to handle this is to prepare a monthly cash flow statement showing the amounts you pay and receipts you get from your customers. This will allow you to predict time periods when you might need additional cash so that you can prepare ahead of time.
Be aware of these areas and try to avoid committing these mistakes. If you did, it would be easy to manage your business finances. With a good rehabilitation program even an old dog can be taught all the new tricks in the world. As a business owner focused on growing your business, surely you won’t need the rehabilitation to avoid these financial mistakes!
