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Top Financial Mistakes Made By Startups
If you are a manager for a small business, you don’t have to learn everything the hard way. Here’s a list of the top financial mistakes small business owners make, so you know what to avoid in the future.
Not preparing a cash flow budget
In the business world, Cash is King, especially in today’s uncertain economic climate. It’s really important to accurately keep track of your cash flow, and the best way to do this is by preparing for your company a monthly cash flow statement. This statement must show accurately show all the payments and receipts. This way, you may be able to know or predict the times your business may need additional cash. This way, you will have the sufficient time to explore the funding options you may have.
To ensure the survival of your business, it’s essential to know when the debtors will pay you their debts. You should always review the debtors list and send reminders to any balances overdue. It’s one of the parts of the business world that no one likes in particular, but has to be done to insure the business survival.
If your business sells goods, managing the buying efficiently is crucial. You have to avoid over or under stocking, as both situations may end up being costly for your business.
If the purchase of stocks is a major expense for your business, you should prepare monthly or quarterly management accounts, to monitor your stock levels. You should always have calculations that estimate how many days will it take to sell your stock, and what is the estimated profit your business will make. This way, you will have clear indications that show if your stock is being managed the right way.
Not registering for VAT in time
Starting a business may mean you have to spend more on the rent, the equipment, machinery, etc, so it’s important to register for VAT as soon as you can. This way you will be able to reclaim VAT and save cash flow.
Not keeping the invoices
Vat can’t be reclaimed if unless you keep the invoices for all the purchases you make, so if you fail to keep the invoices, you may end up over paying VAT.
We all know that managing a business is not always easy, especially in the beginning. But you must not forget that your business is responsible for paying taxes from the first day, not only after it makes profit. You should always include the tax payments in the cash flow budget; to be sure you can meet the liability.
In the beginning, many small businesses make the same mistakes, due to lack of experience or knowledge. Make sure you avoid these common financial mistakes made by startups.