AVOID THESE 5 FINANCIAL MISTAKES IN 2024
Whether you're just starting or you've been in business for years, you can avoid the common financial mistakes small businesses make. We’re breaking down our top 5 to help you sidestep these and confidently build a profitable and financially sustainable business this year.
Mistake # 1: Having no clue how your business is performing
If finances are your blind spot, you could be missing out on valuable data to help you run and grow a sustainable business. You could well be making missteps in your decision-making in the absence of a complete financial picture. If you’re prone to burying your head in the sand and avoiding your business figures, remember your numbers are there to help you, not to judge you.
Now may be a good time to reach out for some accountancy support if you are intimidated, overwhelmed or confused by your business finances or simply don’t know where to start with understanding them.
Mistake #2: Ignoring cash flow management
Many business owners believe it’s simply enough to have money coming through the door. Sadly, this isn’t the case. Poor cash flow can cripple a business - regardless of its size. Cash management means overseeing the inflow and outflow of cash to ensure your business has the cash available to meet upcoming payments. This requires monitoring cash flow, forecasting cash needs and credit control. Delayed invoicing, neglecting overdue customer invoices, poor cost control and not planning for slower seasons can all negatively affect cash flow and can leave you with a cash crunch or shortfall in your small business.
mistake #3: Not saving for taxes
When lost of cash hits your business bank account, it’s easy to forget it’s not all yours for the taking. Instead of dreading the tax bill, plan ahead to avoid last-minute stress. Limited companies need to put aside corporation taxes and personal tax due on dividends. You may also have to put aside PAYE and VAT if you have employees or are VAT-registered. Your accountant can explain the payment deadlines for these. Lots of business bank accounts now have handy “spaces”, “money pots” where you can put aside these funds separately from your main balance.
MISTAKE #4: NOT HAVING A RAINY DAY FUND
The truth is, businesses go through ups and downs and emergencies do arise. It’s essential to have a rainy day fund to avoid leaving your business vulnerable. Ideally, you should have 3 to 6 months worth of expenses saved. This gives you the peace of mind that your business has enough cash reserves to cover an unexpected expense or stay afloat during tough times.
MISTAKE #5: Neglecting pricing
Pricing is not a one-time event. You’ll need to monitor your pricing strategy regularly and adjust as necessary. Inflation is not our friend right during these economic times and creeping costs can quickly erode your profits margins or mean your business income is not able to cover your rising personal expenses. Having a clear idea of your cost base can help with setting profitable pricing.
So there’s our top 5 financial mistakes and how to avoid them. Understanding your business finances helps you feel calm & in control and empowered to make confident decisions. We love supporting female entrepreneurs to be able to do this, if you’d like support, please get in touch with us to book a discovery call over a virtual coffee.
