Proper financial management is highly essential in any business venture. This is particularly more critical for entrepreneurs in start-ups. While factors that can lead to a business’ demise – from unfeasible plans to wrong business premise, lack of customer interest or poor quality of service – one of the most common challenges entrepreneurs in small and medium-sized enterprises experience has to do with monetary issues. This usually springs from lack of ample financial planning and committing financial blunders at the early stages of business operations.
However, having the right money mindset and proper business planning can help entrepreneurs avoid financial pitfalls and run a leaner business. Here are some of the common money mistakes SMEs should steer clear of:
1. Mixing personal with business finances. A major and common mistake entrepreneurs commit at the onset of a business is not having a clear delineation between personal and business funds. Many entrepreneurs conduct personal transactions using business finances. However, even minute personal activities executed at the expense of the company can soon build up to monumental financial dilemmas in the future. A fine line must be drawn between these two entities. For best results, have separate accounts for personal and business use.
2. Miscalculating miscellaneous expenses. Even with extensive financial planning, entrepreneurs can easily encounter unforeseen operating costs that did not come up in the business setting up phase. Hence, it is important to set aside an ample budget solely intended for miscellaneous expenditures to avoid being caught in financial dilemmas. While running a business is about taking risks, it is imperative to minimize risks through proper budget allocation.
3. Making-do via credit. Being buried knee-deep in debt even before a business generates profit is never a good practice. Using a credit card to pay the bills or purchase materials is not a healthy way for businesses to operate. Minimize the use of credit cards in business transactions no matter how tempting it is.
4. Managing the business’ bookkeeping than hiring a professional. A vital building block in keeping a business financially healthy is through implementing a proper bookkeeping process. This may sound like a menial and simple task—keeping tabs of all the business transactions— which is why many entrepreneurs initiate to take on the task by themselves to cut on manpower costs. It can, however, easily be neglected once the business picks up and gets busy. Managing the business’ financial books can be a wise way to cut costs for entrepreneurs who have enough skills, experience and time. Otherwise, it is better to seek the service of an expert. Hiring a professional ensures compliance to government requirements, gives you access to timely financial assessments, and allows you to focus on core business operations.
Are you interested in outsourcing your bookkeeping services in Singapore? We specialize in providing small and medium-sized enterprises with a complete range of accounting services. At Richmond, we can ensure an efficient and effective management of your business accounting needs.
