7 Finance mistakes that will ruin your business

Poor financial mistakes can lead to massive debt, restricted cash flow and becoming a substandard credit risk. These issues can hurt your business and prevent it from prospering. You may have to close your business and work for someone else because you don’t have the funds, or the access to funds, to carry your business through slow economic periods and hardships. Plan ahead to avoid many decisions that have severely hurt business. If you are a small business owner here are seven financial mistakes you should avoid to ensure your company stays in good financial health.

You should use solutions such as SWIFT payments that specializes in multi-banking connectivity. A good piece of software like SWIFT means that everything can be done on one standard platform, meaning you can receive integrated messaging from all the banks you have accounts with to have a better picture of the combined financial data and help manage finances. These advisers want to help others avoid those pitfalls. Small business owners who don’t seek advice and guidance of knowledgeable individuals tend to struggle more and are at a greater risk for failure.

1. Not taking an accounting course: One of the most important ways to understand how your business is doing financially is by monitoring company budget and financial records. In order to understand all the numbers and categories, you need to have knowledge of accounting methods. This is important to prevent accounting errors if you are going to manage your own books, or to catch fraud or other problems if you hire an accountant to do it.

2. Buying non-essential items: A problem some small business face is “ego” purchases like buying fine furniture for the waiting area and paintings to put on the office walls to impress visitors. Restrict purchases to essential items like equipment, personnel, and sales material to help you grow your business until you have enough funds to purchase non-essential items without creating cash flow problems.

3. Not creating a streamlined method for banking: If you have international clients you may require multiple banks to make and receive payments. These will mean multiple account statements and procedures that can be confusing and time-consuming.

4. Avoiding the tax bill: You might be able to avoid the bill for a couple of years, but you will, in time, have to pay all the past taxes plus interest and penalty fees. If you can’t pay or make payment arrangements, the assets of the business could be taken and sold to settle the debt. You will also severely restrict your cash flow for future years while paying past taxes which could also drive you out of business.

5. Not seeking financial advice and guidance: There are government and private resources available to help small business people through the process of starting and managing a company. Many of these people are current or retired small business owners who have been successful in operating a business in the past and have learned first-hand about the pitfalls and risks associated with starting a business.

6. Using personal debt for business purposes: Debt can be a useful tool to help your business grow, if used appropriately. Avoid using credit cards and personal loans to pay for business items. The cost of credit is generally a lot higher with personal credit than it is with commercial credit sources and you are risking your personal assets in case something goes wrong and the business fails. Any debt you arrange should be based on the assets and cash flow of the business so you don’t end up losing your home, as well as your business, if the company fails.

7. Using business funds for personal items: One reason people go into business is because they dream of fine restaurants, expensive cars, and big homes once they become successful. However, the temptation to dip into business funds can be strong to pay for things they want and should be avoided because it will drain company funds and put the business at risk.

Avoid these detrimental financial mistakes and keep your business moving towards success.