5 Money Mistakes You'll Regret

The accumulation of many 'small' bad financial decisions can bring a small business to its knees.

- Viresh Harduth

A crucial contributor to business success is accurate forecasting. Businesses have a better chance of making it through the tough first years if they can forecast things like cash flow and expenses, while also putting contingency plans in place for things they can’t forecast - like unexpected financial knocks or insurance-related events. Yet many small businesses make the same mistakes early on that come back to haunt them a few years later. This is because, of all the roles that business owners take on, managing their finances and being diligent about recordkeeping are among the most challenging.

While one big financial event can result in business failure, the accumulation of small bad decisions can also bring a business to its knees. Here are some financial pitfalls small business owners should avoid at all costs.

1 Neglecting to budget

When it comes to business finances, “winging it” is the worst strategy. Budgeting is critical. It helps you manage your finances and ensures that you’ve planned for recurring, but often overlooked, expenses, like insurance and tax. It also keeps wasteful spending in check and provides insights into where you can cut costs.

Let’s say you own a mobile ice-cream parlour. You’ll have fixed expenses, like truck repayments, wages, and raw ingredients. You won’t be able to reduce these much. But by keeping an eye on your variable expenses, you may notice that your cone supplier is charging 25% more than it did three months ago – an indication that it’s time to find a new supplier.

A budget will also help you to plan and save for the quieter winter months and to identify expenses that you can eliminate altogether – like the certain sprinkles very few people order. Without a budget, it’s only a matter of time until you run into cash flow problems.

2 Not managing your cash flow