One thing that every business has to do is manage their money. Whether it’s income or expenses, if you don’t manage your business’ money you won’t succeed financially. Here are three mistakes to avoid when managing your money.
#1 Not having a budget (this is not as obvious as it seems)
I can hear the accountants scoffing but being a start up can be chaotic and often you can get in the habit of just making sure you have a profit and forgetting to make sure you aren’t overspending in areas, especially if you are a solopreneur. I recently purchased a set of speakers for my computer that sound amazing, but looking back really weren’t in the budget. Why’d you buy them you ask? I didn’t have a budget to tell me they weren’t in it. A budget keeps your money dedicated to the things that bring more money in, like advertising or marketing collateral such as business cards.
#2 Not tracking expenses
Similar to not having a budget, but not tracking expenses can be just as damaging to your business’ finances. Having multiple revenue streams can be complicated and it may be tempting to put it off until tax season as long as there is money in your bank account but, this is not wise. I hardly kept reciepts let alone tracked what I was spending. As long as I had money in the bank, it was all good. This makes it difficult to know where your money is actually going, and makes mistake #1 all the more likely to happen.
#3 Overspending on things that don’t directly bring revenue
If you aren’t good at managing your own money, chances are you aren’t good at managing your business’ money either. It can be tempting to treat your business like a personal piggy bank for all the toys you want, after all everything is an exemption right? Just because you CAN justify it as a business expense doesn’t mean you should. Ask yourself honestly, is this purchase going to make my company money, or is it a nice to have? Now if you’re Boeing then sure, a few new monitors aren’t going to make a dent in your income. However, if you are just starting out as I am, it might be best to invest in more business cards then a fancy new graphics card.
What money mistakes have you made that you’d like to save someone else from making?