Businesses can fail for many reasons, but one of the biggest and most common culprits is poor financial management. Fortunately, you can prevent this from happening by avoiding the following mistakes:
Mixing personal and business finances
It can be too easy to use your venture’s money to pay for personal expenses and vice versa, but don’t give in to the temptation. Doing so will only complicate things during tax time and will make government revenue officials suspicious of your company. It can also prevent you from being approved for business loans since most lenders want to ensure that you’re using their money for real business-related expenses, not for your shopping trips.
Choosing the first loan you see
Speaking of loans, make sure to shop around before you submit an application. Doing so will help you find a product that lets you borrow the amount you need without charging too much interest. Compare at least 8 or 10 loan products to know which one will give you great value for money.
Not repaying your loans on time
Getting a loan lets you grow your business without using up your capital, but make sure to repay them on time. Lenders can charge sky-high late fees on top of the interest fees so, if you ignore your loans repayment, you can find yourself knee-deep in debt sooner or later. The same goes for personal loans; having poor personal credit shows lenders and investors that you don’t know how to handle finances properly and can discourage them from working with you.
Neglecting to follow up on customer debts
Giving customers a line of credit is a great way to develop client loyalty, but it’s also a great way to get bankrupt. With this in mind, you must take steps to encourage your customers to pay you back on time. Send regular reminders about their due date and the amount they must pay, and don’t hesitate to call them to follow up on their payment when they’re past due.
Avoid these mistakes to improve your business finances and make your venture more successful.