Getting your Financial House in Order
Several factors can contribute to failure when it comes to owning a small business, but failure to manage finances is one of the most common. Many financial mistakes are due to poor planning at the start-up stage. Many would-be small business owners fail to properly estimate the true cost of starting and running their own business. Here are some of the most common financial mistakes that small business owners need to be aware of.
Not Enough Cash in Reserve
Small business owners know they need a certain amount of money to get their business off the ground. Once the doors are open, you hope your cash flow projections are right. But what if they’re not? It may take several months or more to achieve the cash flow you predicted, and perhaps even longer to make a profit. Make sure you have some operating funds in reserve to help keep the business running until business income become more stable.
Depending on Credit Cards
Many small business owners turn to credit cards, both personal and business cards, when facing financial issues. They’re easy to get and easy to use, but they also can bring high interest rates when the introductory rates go away. Consider other sources of capital first, such as small business loans, first.
Lack of an Efficient Accounts Receivable System
Many small businesses struggle with finances simply because they aren’t being paid what they’re owed in a timely manner. Establish a clear process for collecting payments. Be sure to put your payment terms on every invoice, and don’t hesitate to send reminders.
Not Asking for Help Soon Enough
Many business owners wait until it’s too late to ask for help with a financial issue. As soon as you realize you may have a problem, talk to your banker or accountant right away. The U.S. Small Business Administration also has several resource partners that can help. For more information, visit www.sba.gov.
Find more tips on starting and growing your business at sba.gov. Learn more about The Partnership’s small business resources.