If you think that starting a business involves only planning then you are wrong with planning it is essential that execution process will be given the same attention. No one is always right and making mistakes is in the nature of human being if you have also made some mistakes while running a business then learn from them and you will definitely improve.
If you have just started your business then try to learn from other mistakes and read as much as you can so that you will avoid making the same mistakes like others. Behind dissolution of a business, financial problems are the most common reason so it is better to put more focus to it. You will find the most common errors that an entrepreneur make while running a small business.
7 financial mistakes that most small businesses make:
Not preparing financial statements
The basic error that small business entrepreneurs make is not keeping a tab on the cash inflow and outflow in proper financials. Sometimes it happens when an entrepreneur forgets from whom to take payments and whom to pay so it is better to record every transaction in financial statements. In India, people dont pay amount until they told to do so and it is a trend here that small business operates on lending basis. It is beneficial to hire a professional service for recording transactions rather doing on your own.
Improper management of personal funds and business funds
While management of funds the most common mistake that an entrepreneur makes is mixing up the personal funds and business funds. This leads to insufficiency of funds in either of the places. It is essential to not to count personal funds with business funds as both have their own role to play. Manage your funds separately for personal use and business us for a fruitful future.
Lack of knowledge in some key areas of business definitely impacts the business operations. In this complex tax system in India, some may find it hard to imply it as per rules and might overpay than the amount they were actually liable to. With the introduction of GST, many entrepreneurs have to face a hard time of understanding it and recently with the fall in GST prices not all entrepreneurs know as for how much they need to pay. The solution to this problem is read more or let your accountant handle it.
No control on spending
In the initial phase of the business, entrepreneurs think that they need to hire employees, buy furniture, coffee machine for office, good location, etc but arent these all just wastage of money. The importance is comfort is overvalued than capital optimisation which puts the business in complex situations later on. So it is beneficial to understand the importance of money and use it properly.
There are times when businesses have to go through tough times but they dont have the sufficient funds to meet the odds. This problem is common for small businesses in India which can be rectified if an entrepreneur knows it in advance and stockpile emergency fund to face the situation.
Focusing on noncash activities
This is where an entrepreneur starts focusing on the wrong direction as the sole objective of any business to be successful in generating revenue. If a business put more focus on noncash activities then a time will come when there will be no funds to run bring back to the position it was before. An entrepreneur must stick to its plan to avoid these problems.
Sometimes being hurry can steal the thunder that you were hoping to get after running your own business. Generally, it is seen that once the business has some additional capital than required, entrepreneur plans to invest in other businesses. This is the major problem as an entrepreneur must think of its business growth first and once there is stability to it then start looking for other growth opportunities.