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Do you want to know the biggest reason why businesses fail?
According to this article, it’s because of poor cash flow. In fact, as stated in the linked article, 82% of businesses fail as a consequence. It makes for unnerving reading, but your business doesn’t have to become one of those statistics. With financial wisdom and avoidance of the mistakes we will lay out in a moment, you might be able to sidestep the possibility of failure.
Here are some of the money mistakes you need to avoid.
#1: Ignoring tax deductions
In business, every little helps. So, while we are sure you add your largest expenses to your tax form at the end of the financial season, you should also include those smaller expenses that you have incurred throughout the year. You would be a fool not to, because while they might not seem very much at the time, they do add up to something greater. Therefore, save your receipts rather than throwing them away, and tally them up to lower your tax bill. Alternatively, outsource this area of your business to an accountancy firm such as QAccounting, because they will ensure you get the tax benefits that you are entitled to.
#2: Taking out too many loans
As a business owner, you probably took out a loan to get started with your venture. You might have taken out another loan to cover unforeseen expenses down the line. And you may well have considered a cash loan should you have found yourself in a financial jam. The upshot of this is debt; a hole that you will sink ever deeper into if you continually rely on loans to survive. Taking out a loan at the start of your business is understandable, but you then need to operate financial wisdom to negate the need for another. The alternative is failure, because the more debt you have to pay, the less secure your business will be. Look for alternative funding ideas, perhaps through crowdfunding or by finding an angel investor when you’re in need of money, and then work with your accountant to manage your funds and pay off your debts.
#3: Not putting money into an emergency fund
We have already discussed the consequences of this above. If you don’t have an emergency fund in place, you will then be reliant on further loans to get you out of trouble. Therefore, think about the emergencies your business might face. You might face an income shortage if your business is seasonal, for example, or your office technology might fail, resulting in the need to buy something as a replacement. Your emergency fund will cover you in these and other eventualities, so if you haven’t already, aside from your usual savings, create a special emergency fund to see you through a potential financial disaster.
Not every business survives; that’s a common fact. Chances are, you might face failure yourself. However, you can alleviate the chances by taking the necessary steps to protect your business, and this includes finding ways to manage your finances wisely. Consider the mistakes we have mentioned in this article, and then do your very best to avoid them. To reiterate; the future of your business depends on it.