Mar 07 2024 11 mins
Money Handling Mistakes Pt 2 – Belk on Business – Episode 186
There are many mistakes a business owner can and does make, some which could be fatal to the business either directly through mismanagement of the finances or indirectly through failure to follow proper internal controls or following basics of asset protection. Best to run finances in a proactive manner, not a reactive one making tweaks and not major adjustments which can shake a business and its culture to the core.
1) Ignoring the numbers – for many businesses, especially in the first phase of business ignores the accounting/finance function of the business until either they are needed for loans or taxes. This results usually in overpaying taxes, inability to have an understanding of what is and isn’t working in your business and an inability to plan effectively towards profitability and scaling. Can also result in making poor financial decisions such as purchasing items just for tax deduction purposes or purchasing what the business doesn’t really need.
2) Not budgeting or cash flow planning – budget is developed around goals/projections along with cash flow projections so to be able to hit metrics, determination of when or will we run out of cash, when can we hit savings metrics for scale or improvements, cash flow needed for taxes, equipment, personnel, savings and crisis planning. Cash needed for emergencies and opportunities (this usually should be reflected in retained earnings, not debt).
3) Failure to review financial reports – lack of internal controls around accounting and finance – review payables, receivables, bank statements and credit card statements periodically. Review helps reduce potential for fraud.
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