Starting a business may not be the easiest thing to do, but you can complicate things even more by making the wrong financial decisions, which will affect your business success. According to experts, approximately 20% of business start-ups fail within a year, and this is partly due to the common financial mistakes many start-up businesses make. So, are you a new business owner looking for ways to keep your company afloat? Then do not make the following money mistakes:
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No business insurance
Many new business owners think insurance policies are only for already established and successful companies, but that is not necessarily the case. As early as you can, you should ensure that you give your assets the protective cover they need by purchasing business insurance. These are specially designed to protect you and your company against different kinds of costly possibilities, ranging from property destruction to litigation fees. All you need to do is find the right coverage policy with a reliable provider. Fortunately, there are several companies like State Farm that offer a wide range of insurance policies.
No budget for your business expenses
Although this might sound obvious, not creating a clear business budget will make it difficult to ride out those harsh financial waves that most start-ups go through. Creating a budget will help set a financial direction for your business, covering marketing, operations, administrative, and other expenses. Your budget will also help you exercise financial discipline, as it acts as a guide for determining what your priorities are in terms of business spending.
Not having an emergency source of funding
Beyond having a budget for your business, you should have some financial cushion for those unexpected moments. In addition to having a source of funding for emergencies, it is vital to save for lean times. Most start-up businesses do not start making profits for months or even years, and the company will need some finances to rely on before it starts breaking even. That means that it is best to have enough savings or some additional source of funds to support your start-up during its first months or years of operation. Many experts advise new business owners to have at least three months’ worth of funds in an emergency contingency fund. That will also cover certain extra expenses like delays in payment from clients.
Relying solely on others to manage your finances
Business start-ups usually have very manageable financial figures. Although it is not a bad idea to have an expert on your company’s money, it is crucial to regularly track the figures yourself. You do not need to spend a lot of time going through detailed documents of all financial transactions. Only going over some of your company’s monthly financial reports should be more than enough. The goal here is to have a clear understanding of your business’ financial direction. Focus on the invoices, amount of money in the bank, cash flow projections, and projected revenue.