Costly Business Mistakes
Unfortunately, many business owners make costly mistakes in their first year of starting up that over time have a negative impact on their business. In 2023, over 900,000 new businesses were incorporated in the UK. Starting a new business is a huge accomplishment – one that also comes with a lot of responsibility. The first step towards a successful a business is financial management.
Sadly, within 2023 the UK also experienced a record high number of company insolvencies. More than 25,000 company insolvencies were registered.
In this blog, we are going to highlight key mistakes that can occur and talk through advice on how to avoid them.
Common Financial Mistakes
Not having a clear financial situation understanding: It’s important to know exactly how much money you have coming in and going out each month. This will help you make informed decisions about where to allocate your resources.
Not separating personal and business finances: Keeping your personal and business finances separate will help you stay organised and avoid financial complications down the road.
Not having a budget: A budget will help you track your spending and ensure that you are not overspending. It’s also important to periodically review your budget to see if there are any areas where you can cut costs.
Not putting money aside for taxes: It’s important to set aside money each month so you can pay your taxes on time. These are incredibly important because if you don’t pay them on time, you can face some pretty hefty penalties.
Using a credit card for additional funding: While using a credit card can be a quick way to get additional funding, it’s important to be aware of the interest rates and fees associated with credit cards. If not managed properly, credit card debt can quickly spiral out of control.
Not seeking professional help: If you are not confident in your own financial management skills, it’s important to seek out professional help. A financial advisor or an accountant can help you make sound decisions about how to best manage your finances.
Trying to grow too quickly: While it’s important to have ambitious goals for your business, growing too quickly can put a strain on your finances. It’s equally important to grow at a sustainable pace so you don’t overextend yourself financially. This can be in terms of both business expansion as well as product expansion, in laymen’s terms – over trading.
Making large and unnecessary purchases: It’s important to be mindful of your spending and avoid making large purchases that are not essential for your business. Before making any big purchase, ask yourself if it is something that you really need and if it is the best use of your resources.
Failing to plan for the future: It’s important to have a clear understanding of your financial goals and to plan for the future. Such as setting aside money for unexpected expenses.
Delays in invoicing: Many business owners get caught up in the day-to-day activity of their business, and often forget to invoice! Sending invoices in a timely manner is important to ensure that you are paid in a timely manner. This will help you avoid any cash flow problems and keep your business running smoothly. This also includes making sure that your customers are fully aware of your business’ payment terms and conditions.
Not effectively chasing for payments: This is common amongst small businesses, but it’s important to make sure that you are getting paid on time. Therefore, effective credit control is essential, and you should chase up any payments that are overdue. This can be done via email, phone, or even in person if necessary.
Not having a realistic sense of cash flow: This can have a very detrimental effect on your business. It’s important to have a clear understanding of your cash flow so you can make informed decisions about how to best manage your finances.
Failing to negotiate with suppliers and creditors: Suppliers and creditors often open negotiate payment terms and discounts.
Overcome challenges with Partnership Invoice Finance
Starting a business is no easy task! It takes a lot of hard work, dedication, and time to get it off the ground. In addition to all those challenges, business owners also must juggle the financial responsibilities that come with running a business. Making mistakes with money can be costly and set your new business back by months or even years.
If you are struggling to achieve and maintain a healthy cash flow, then entering into an invoice finance agreement may be the solution. At Partnership Invoice Finance we want to see your business grow sustainably, we take a vested interest in helping you overcome challenges with funding that grows alongside the business.
We offer invoice finance to start-ups, SME’s, established enterprises, with funding facilities from £20k up to the region of £1 Million. With our recourse factoring service, we expertly manage all aspects of your sales ledger management function, from the moment that you notify us of the sales transaction, to the point when the debt is paid.
Introducers
The world runs on introductions, we welcome all introducers and their clients. Our holistic financial approach ensures we look at the business’s whole financial situation. Our fee structure is presented with no hidden charges, and we are happy to talk your clients through our costings with complete transparency.
