9 Money Struggles Small Businesses Face and Ways to Deal with Them

Out of all the challenges faced by small business owners, money management often tops the list. When surveyed, a majority of small business owners both experienced and amateurs agreed that they struggled with finances at some point of time (or rather, quite frequently). Talking about the reasons responsible for the failure, a number of factors were to be blamed. Falling profits, stagnant business performance, and cash-flow mismanagement are some of the many causes that resulted in financial stress. But, what are the mistakes committed by business owners? Let’s discuss.

Common Money Management Mistakes and How to Avoid Them:

1. Not Following A BudgetIf business owners could predict the market, there would not be any losses to incur. But forecasting market behavior correctly doesn’t seem like much of a possibility. Instead, knowing how much money is flowing into your firm and where every penny goes can help develop some clarity. To achieve this, budgeting is one of the most efficient ways. A budget will help you through every month without much confusion about where your money is. It will tell about the firm’s profits in detail and the need to cut down on expenses if needed.
2. Not Using An Accounting SoftwareNot every entrepreneur comes from an accounting background. Failure to manage the business accounts efficiently can lead to several issues that can be difficult to deal with later. Small businesses, especially in their infant stage, cannot afford to hire a professional accountant, mainly owing to lack of funds. An accounting software is, thus, a must have for SMBs. Moreover, hosted accounting software, such as Sage 50 hosting, helps business owners to manage their accounts on-the-go.
3. OverspendingTo earn more, a business needs to spend more. But, spending more than what a firm earns is a huge red flag. It is not only derogatory for the firm’s budget; it also leaves them with more debt than they can afford to pay. Buying extra machinery, hiring more staff than needed, going overboard with interiors are some of the common areas where firms might be spending more than needed. Cutting down on wasteful expenditure is, thus, a must.
4. Not Managing Cash-flowA vast majority of new business owners fail when it comes to cash-flow management. But it is important to realize that not every customer will pay in time. Follow-ups are critical if you do not wish to fall short of funds when you yourself have to make payments. For any business to run successfully, accounts payables and receivables need to be managed efficiently.
5. Not Drawing A Line Between Personal and Business FinancesBusiness owners, particularly those new in the field often share a common bank account for their personal and business needs. There are many reasons why this is wrong. There is a fine line between your personal and business finances. Entrepreneurs who mix their personal and business finances often end up struggling financially. To obtain clarity about where you stand as an owner and as an individual, there should be two separate bank accounts, one personal and the other for business.
6. Using Profits For Wasteful ExpenditureProfits are supposed to be saved and reinvested into your business and not used for covering your day-to-day expenses. New entrepreneurs, in particular, need to draw a line between their liquid cash and profits. Profits are what is left after you are done making all your payments.
7. Delaying Tax PaymentsIgnoring your tax payments is going to do you more harm than you think. It complicates your tax situation, makes you pay a huge tax amount at once, and burdens you with penalties. Tax software hosting solutions, such as Lacerte tax software hosting, can help you manage your taxes efficiently. If you are relatively new in the field, seeking professional advice can help you understand your taxes better.
8. Underpaying Or Not Paying Yourself FirstBusiness owners need to understand that the importance of paying themselves first. It is important to have a secure place when it comes to personal finances. A strong financial condition is necessary for any individual. Not paying yourself means you are falling short of finances and wrecking your financial situation. Also, it creates an illusion regarding your profits. Supernormal profits are a good thing, but not unless you pay yourself. There always needs to be scope for improvement.
9. Not Researching The Market PriceWhat happens when you do not research the market price of your product? You are either selling your product dirt-cheap or you are over-charging your customers. The impact to your business in both the cases is not conducive to growth. Charging less for your product may seem profitable in the beginning, but can negatively impact your business in the long run. There are multiple ways for a business to grow in competition other than keeping prices on a lower tab. Seeking help from a professional can help build better marketing techniques. 

In Conclusion

Certainly, a business comes with a number of pitfalls. But, acting smart at the right time can help a business owner in avoiding them. Keeping in mind the above mentioned mistakes, using smart accounting software hosting solution, and taking help from professionals in the field can help a business grow successfully.