Common Financial Mistakes Small Australian Business Owners Make
Posted on: 29 April 2021
As an entrepreneur, your core objective is to generate income and expand your business. But without some basic information, you are likely to make poor financial decisions, which may lead to business closure. That's why it is essential to hire a trained accountant, no matter the size of your business. Below are five common financial management mistakes you can evade by working with a business accountant:
Failing to Plan
The first mistake most small business owners make is failing to have a cash flow forecast and a working budget. Having a solid budget and rolling it over every month helps you track your performance and make wise financial decisions. It allows you to pull all the business finances together and keep things in line to ensure your business is financially stable and has a good cash flow.
Overestimating Future Sales
Do not allow optimism to compromise your objectivity, as much as it's critical for your new venture. For instance, sales volume may go higher over festive seasons, but expecting it to double might be a little unrealistic. An accountant provides you with more accurate sales projections. They will analyse the actual numbers and look at the historical evidence to give the correct forecast of your future sales.
Running Your Business From a Spreadsheet
The use of spreadsheets is outdated, and small businesses should avoid them like the plague. With cloud-based accounting solutions, you will quickly get accurate management information that tallies with daily bank feeds. So, take advantage of this technology to enhance your financial management systems. If you are not proficient in handling the technology, an accountant will come in handy.
Cutting Costs Rather Than Driving Revenue
Naturally, you will try to cut costs in a bid to increase profits. But determining what to forego is challenging if all the expenditures in your business are crucial in running the operations. In that case, optimising your revenues is better than cutting costs. Some revenue drivers include the number of clients, the number of times the clients buy from you, and the average sales made every time a customer buys a product. By understanding these drivers, you will implement the right strategies and generate more revenue.
Delaying in Collecting Debts
Chasing debts is time-consuming, yet it necessary for the survival of the business. You can send reminders to debtors with a history of delayed payments before the due date. Make debt collection a function in your operations and, where necessary, use debt collectors.
Once you avoid these mistakes, your business will experience financial growth in no time. And, if you doubt your competency in financial management, consider hiring a certified accountant.
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