Financial mishaps are something that business owners should actively prevent, as they can bring down a company. Read on to discover these money mistakes.
Business owners are prone to making errors now and then. Most mishaps are a normal part of the process of developing and growing a business. Most organizations survive such errors without much of a problem.
Some mistakes, however, can lead a company to ruin. Small businesses and startup companies are especially vulnerable to making mistakes that can cause major financial problems.
If you have plans to run a business in the future, you'll want to avoid mistakes that can cost your business a lot of money or lead you into bankruptcy.
Here are common financial mishaps that business owners make:
1. Mixing Personal and Business Finances
Before you even start a business, you need to have the mindset of separating personal and business income and expenses. This means that you can't dip into your business income to pay for personal expenses, such as mortgage payments, condominium insurance coverage, meals for your family and household essentials.
You can prevent the inadvertent co-mingling of finances by opening a personal and business checking account. This will allow you to physically keep these two funds separate.
Do the same for credit cards. Maintain a corporate credit card on top of the personal cards you might carry.
Another suggestion is to use reliable recordkeeping software specifically for your company. When tax season rolls in, you can file your taxes correctly - and won't put yourself at risk in case the Internal Revenue Service (IRS) decides to audit your business.
2. Not Investing in Customer Service
Customers are the lifeblood of any business. Given that they're the ones buying your product or service, you can't succeed as an entrepreneur if you don't have them.
Companies that fail to listen (or worse, choose not to listen) to customers are likely to miss out on repeat business. This, however, isn't even the worst-case scenario. The mistake of disregarding the complaints and concerns of customers can quickly result in a company's demise.
Individuals tend to become angry when someone doesn't listen to them. As a result, they vent their frustrations to others or on social media platforms like Facebook and Twitter. If you're running a business, you don't want your customers to vent those frustrations to others who may serve as prospective customers. Unfavorable word of mouth, along with negative reviews, can send a company to the grave.
You can avoid a potentially disastrous financial mistake by making customer service the primary focus of your business. This involves coming up with a system to quickly and effectively respond to complaints and inquiries.
Even if a customer has nothing good to say about your product, service or brand, you should still thank them for their feedback and acknowledge their problems or concerns. Sometimes, just listening to your customers politely is all it takes to convert a dissatisfied customer into another person who's willing to give you another shot to earn your business.
3. Hiring the Wrong People to Join Your Organization
Hiring and training employees cost a lot of money. What's more, lazy workers, insubordinate employees or those who simply lack the skills are a major financial burden, especially to a small business or a startup company. Errors made by employees who are unable to grasp the basic business processes can snowball and quickly drain your financial wallet.
When putting up a business, put a lot of effort into recruiting and retaining the best people for the job. Alternatively, outsource the task to a reputable service to get the best possible outcome. If you're not sure where to start or even recognize the difference between recruitment over selection, a human resource services needs to step in.
4. Not Keeping Up with the Changes in the Market
Failure to keep up with the times is another financial mistake that you should avoid. Markets change. If your business remains stagnant while competitors and technologies evolve may cost you customers. This can ultimately result in the downfall of your company.
So make sure that you stay up to date with your market by networking with others in your field, surveying customers on what product or service they want to buy next, attending conferences and reading the news.
If a major change is going to disrupt your industry, be ready for it. Although keeping up with the market changes can be challenging and costly, it's a critical investment needed for you to survive and thrive as a business. You don't want to be selling floppy disks when everyone else is using cloud storage and USB thumb drives.
Mistakes can cost your company money. If you address these four items effectively, you'll be in a better position to succeed in your business.