When your business is just starting out, there is a tendency to focus on getting the business off the ground and not on financial balance. Most tend to relax once they see that money is coming in, this is can be harmful to the business in the long run. Going into a business even if it stemmed from a side hustle, you need adequate financial planning and execution. So if you’re going into a new business or if you have already made some strides in your current one, these are some common financial mistakes to avoid when your business is in its early stages.
1. Doing Too Much Too Soon
This can really leave you spending so little time on so many things, that your financials begin to suffer. The mindset of most people who are starting out is to get as many clients as possible. The financial structure has to be put in good order so you do not run into trouble early on. It is better to structure your cash flow with a few clients at first and source for more clients when the system is in place.
You can also read: 6 Tips For Maintaining Positive Cash Flow In Your Business
2. Not Putting Up An Emergency Fund
An emergency fund can come in very handy when you hit bumps which you definitely will. Starting operations is never easy and one financial mistake that can hit you is needing some cash and having to source for it outside the company. You could need cash during a dry spell or when you experience late fees, personal issues could create a need for quick cash. In this event, it would be really helpful if you had put a little away before going into operations fully. Remember that a percentage of the profits always has to go into this fund as you never know when the need could arise.
As you continue in your venture, you want to make sure you are investing some of the money you get. A business that is not growing or at least evolving and adapting will run into walls in the long run. To facilitate the growth of the business it is essential that you invest in other things related to the business.
4. Not Separating Personal Account From Business Account
These days, a lot of new business start out as side hustles. It is very common to be heavily and personally involved even in the financials. It is very important that you have a separate account for your business. There is a very high tendency to spend money that is meant for your business. This also makes it more difficult to keep track of how the business is doing, and knowing exactly what the details are.
You can also read: 3 Reasons Why You Should Have A Business Savings Account
5. Unorganized Accounts
Even at the very early stages, your accounting has to be neat and specific. You need to know exactly how much is coming in, what your expenses are, the money your business is owed and how much you need in the account at the end of a quarter to make a profit. These separate margins will help you manage your business better. You can also look out for accounting software or get knowledgeable in Excel to help you along.