5 Common Financial Mistakes Small Businesses Make[[ 1527213660 * 1000 | amDateFormat: 'll']] | 225 views
Managing finances and profit is an essential part to any business, wedding entrepreneurs included. In establishing your path and business growth, financial management is needed not only to create profit but also to turn them into long-term wealth to secure and sustain the business. Some think it's confusing and scary, some others underestimate it. In either case, take a look at the 5 common financial mistakes an entrepreneur makes, so you can avoid them in the future or fix them today.
Mixing business and personal expenses
Never mix business and personal expenses, keep them on a separate account. This way, it will be easier to track business expenses for bookkeeping purposes monthly or annually and count your business' losses or profits. Having separate accounts would also ensure privacy should an outer party needs to go through your account statements. If you already have separate accounts, try to always use your business account for business purposes only. If you're a registered business entity, keeping your accounts separate will protect your personal assets as well.
Not knowing your business' cost
Another common mistake is that businesses spend more than what they earn, simply because they do not know how much it cost to run the business. A cost of running one's business doesn't only cover for a day's job. If you're a wedding photographer for instance, the cost doesn't only cover your camera maintenance or the day's meals. It would also include your office rent, employee salary, and other coveted expenses that seemingly does not affect the business directly, but it actually does. If you didn't put these numbers in count, you would end up spending money you don't have which will lead to a loss at the end of the day. Knowing what it cost to run your business will also affect your pricing, which is an essential part for any entrepreneurs in building a sustainable business.
Even when it's hard, mundane, or boring, skipping bookkeeping is yet another financial mistake you can make. In relation to the previous point, maintaining bookkeeping can also let you updated on how much running your business really costs. Other than that, it keeps track of your finances and would be a great reference to make money-related decisions in the future. When it comes to bookkeeping, doing it weekly or monthly is the best way to go. You will avoid the hassle of doing a year's worth of receipts and transactions which is no fun at all.
Not taking personal salary
Even as business owner, it is definitely okay to take personal salary from the business sales and count it as expense. Not taking personal salary each month will result in you taking chunks of cash from the business account which will complicate the finance and expense tracking we talked about earlier.
Most small businesses settle for monthly profit, and spend it all almost very instantly. It is one thing to make profit, but turning it into a sustainable wealth is an entirely different story. In fact, a business that spends all of the revenue that comes in is by definition an unprofitable business. So, if you want to build wealth, you would have to set that profit aside for the business' growth. Save at least 10% of the whole sales to invest in growth and work around your expenses. For instance, if your business generates a $100 sales in this month, save $10 and don't exceed $90 in your expenses. This way you'd have fund invest in growth, pay off debt, or build cash reserves.