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7 money mistakes every entrepreneur makes and how to stop it

One of the areas where many entrepreneurs fall short is in the management of their money. Here are seven common money mistakes that entrepreneurs need to stop doing today.

1. Using your personal account for business

Though it might be easier to have one account at the start of your business, it is important to have a separate business account. The reason for this is because it will be easier to see how much money your business has. It is also important for when the tax season comes and your accountant can easily see what is company expenses instead of wading through your personal expenses too.

2. Overspending on unnecessary items

When starting out in business, it is important to not overspend on valueless items. You should ensure that your purchases will help your business to generate income. If the item is not revenue generating, then you should rethink your purchase. You can invest in the fancy office equipment when your business is stable and has a good following of clients.

3. Mismanaging your cash flow

Cash flow is the life blood of a business. If you do not manage it carefully, your business will struggle to grow. You need to keep track of your income sources as well as how you are spending your money. You can easily set up a system by using an excel document.

4. Not testing before investing

It is important to test your product before you invest a lot of money in the final production of it. By producing a small test batch that you can send to market you can see if you there is a demand for the product and what aspects need to be fine-tuned before you invest in a final product.

5. Underestimating sundry payments

When you start your business, it is important to draw up a rough budget to see what your income and expenses will be. Always overestimate the sundry payments which you may not be aware of when you start your business.

6. Not having a six-month nest egg

Many entrepreneurs live day by day and do not plan for lean times or emergencies. It is important to keep about six months’ worth of money to pay expenses for when you may not have any finances to pay your debts. By making sure you have these savings, you will be able to rescue yourself from relying too much on your investors or bank loans.

7. Using the credit card haphazardly

A credit card is a great tool for a business but if it is mishandled, it can cause a debt which you may struggle to come out of. Ensure that should you pay with your credit card you will be able to settle the debt at the end of the month. A piece of sage advice is “do not count your chickens before they have hatched”. Ensure you have money in the bank before you spend it.

By becoming aware of these seven mistakes you will be well on your way to making your business more financially healthy. Remember only spend what you have and do not buy the dream sports car with your first big pay check.

Brought to you by the NSBC.