Running a small business is not a walk in the park. Don’t be fooled by its name; a “small” business requires a lot of effort and dedication to making it successful, too. Did you know that there are currently 32.5 million small businesses in the US alone? That means you’ve got a hefty amount of competitors no matter what kind of business you have.
Unlike larger corporations that have a much greater amount of resources to help recover a financial mistake, small business owners may not have that kind of luxury. Here are six small business finance mistakes that entrepreneurs commonly make.
Not Prioritizing Cash Flow
What keeps your small business afloat is the cash flow. Having a healthy cash flow is important for business operations, making business-related purchases, and paying vendors. Sometimes, if there’s huge profitability raking in, entrepreneurs can end up neglecting their cash flow.
Forecasting income allows small business owners to make the right decision on how to treat their money wisely. You can do so by utilizing the right invoicing software or hiring a professional accountant to do it for you.
Applying for Financing When it’s Not Needed
It can be tempting to apply for financing just so your small business has some extra funds. But before you do that, take a look at the current standing of your business. Do you need to purchase new equipment immediately, or is your business lacking cash flow? Are you also certain that you’ll be able to pay it back on time? Here are the signs that your small business could use some extra funding.
Forgetting to Save for Emergencies
As a small business owner, it’s important to have some funds allocated for emergency purposes. There will be occurrences when equipment breaks down, or there’s an unexpected expense. The financial cushion ensures that your small business stays afloat, and you don’t end up having to take out many funding options without having the means to repay it.
Combining Business and Personal Accounts
They say never to mix business with pleasure, and that statement stands firmly, too, when it comes to operating a small business. Mixing the two is just a financial mishap waiting to happen.
At least when you keep both accounts separate, it’ll be easier for you to pinpoint which funds should be used for your small business. Additionally, you’ll find it easier to set financial goals to ensure more success and accomplish them.
Neglecting One’s Salary
Small business owners tend to forget they have salaries too! Cash is king, so always remember to pay yourself for your hard work in running a business. It can sound selfish at first glance, but in the long run, this will provide more benefits and success for both you as the owner and your business.
Incurring Late Payments
Owning a small business means wanting to make your customers as happy as possible while being able to make payments on time. Admittedly, this can be tricky, but if you don’t pay on time, then your business will suffer from it.
Keep track of the payment deadlines you have. Paying earlier is much better than missing the due date, as it can cause penalties.
How REIL Helps Small Business Owners
REIL Capital is here to help small business owners like you reach the top and be successful. We offer many funding services, such as invoice financing, equipment financing, asset-based lending, and many more. Send us a message, and we’ll be more than glad to assist you in determining which financing option is the best for your small business. And when you’re ready, it’s time to apply!
