Mistakes will happen in life because, after all, we’re only human! The same can be said for any business, but when mistakes happen, they can usually have financial implications. For many businesses, that can be a dangerous mistake to make because each financial hit could potentially send the company under. Here are some tips for stopping your business from making financial mistakes happen.
Outsource Instead Of Hiring
Hiring staff is needed as a company grows, but it’s when to do this that many businesses tend to get wrong. You should be hiring a staff member to contribute to the business and to fill a skill that you currently don’t possess within your workforce. The first thing you want to do is to see if any current employees would be able to take on the role that you’re after alongside their current one. If that’s not possible, then consider outsourcing the task if it’s something that doesn’t require daily work.
Handling social media accounts, for example, is sometimes wise to outsource, unless it requires hours of specialized attention. With outsourcing, you’re saving the business money simply by using the hours you need, rather than having to hire someone full-time and to also commit to paying towards extra add-ons like their pension and other company benefits that you might have for staff.
Having Too Much Credit Card Debt
When you start looking into credit options in your state, it’s important to understand that the money you are borrowing was never yours to begin with. A lot of households and businesses, in general, can really struggle if they end up having too much debt. It can potentially cause major problems, and with a business, you’re responsible for people’s livelihoods.
If you need to take out a credit card or a loan, try to stick to the one or consolidate it all into one account. That way, you can keep an eye on what’s being spent. Credit cards can be the most dangerous because you can set a mark on how much you want to be able to spend, and if that’s going into the thousands, you want to make sure you have enough money in the account to pay it back.
Failing To Create An Annual Budget
Budgeting is the best way of controlling the money that’s coming in and out of business. For every department you have within the company, they’ll have their own budget on what can be spent. Failing to create an annual budget can mean that lots of haphazard spending goes on, and there are no rules on what to spend and what not to spend.
This lack of communication can certainly be detrimental to a business, and if you don’t control it from the beginning, you may be dooming your company.
At the start of each financial year, it’s good to go through the money that was made during the previous year and what was spent in regard to each department. You can then work through what purchases could have been avoided and what changes will need to happen in order to help each department continue its growth and successes.
Making Unnecessary Purchases
It’s important not to forget that each purchase made within the company is reducing your profit. Regardless of whether you’re just starting out or have been established for a while, unnecessary purchases can be damaging to the amount of money that your company makes the year. Try to curb these purchases by ensuring you have a second line of authorization for any big purchase. This would need to be signed off by more than just the one person and is, therefore, a way of making sure it’s a purchase that’s warranted.
Not Having An Emergency Fund
And finally, an emergency fund is certainly something that’s recognizable for many people, but not everyone has one. Unexpected things happen in life, and these financial mistakes are one example. You may not have the money immediately available to pay off the mistake, and that’s why an emergency fund comes in handy.
So many businesses have failed due to financial errors, so don’t let your business go down the same path.
Interesting related article: “Starting an Online Business? Avoid These 6 Mistakes.”