It shouldn't come as a surprise that finances are at the heart of every single business. Even so, some businesses simply do not manage revenue and cash flow as carefully as they should. What financial mistakes may do permanent harm to businesses? What can businesses do to fix critical mistakes before it's too late?
1. Taking Too Many Loans
Everyone needs a little help, and that often includes new businesses. However, taking too many loans can ruin even the best start-up business. And putting everything on a credit card is just as harmful as taking out too many loans or selling too much equity. If you must have debt, make credit cards the last resort. "Credit cards carry high interest charges and annual fees," Forbes explains.
2. Don't Rely on Estimates and Approximations
Relying on estimates and approximations can ultimately lead to a whole slew of problems. Remember, projected profits, sales, and revenues are never a certainty and budgeting for low-end numbers may very well help you stay in business. Similarly, assuming employee counts are always 100% accurate in retail and sales companies is another big mistake. Everyone makes mistakes. Cash management solutions can help you identify any errors or miscalculations ASAP, so you can take steps to fix them. These cash management systems, such as electric cash counters or coin counter and sorter machines, save time and keep all counts 100% accurate—helping businesses accurately handle expenses. Cash management systems help identify counterfeit bills as well.
3. Not Having a Backup Plan
Finally, businesses should always be prepared for the worst. Always have a backup plan, should little or not so little, problems come up. Work closely with an accountant, keep an emergency savings account, and even have a list of emergency investors or financial advisers to call, if necessary.
With dedication and adequate planning, businesses can survive financial trials and hardships. Keep debts as low as possible, invest in systems to keep sales and cash transactions perfectly accurate, and always have a backup plan.