We are aware that more often than not, businesses make a whole lot of mistakes that could prove to be disastrous for them. For instance, we understand that 21% of entrepreneurs running small businesses admit that they are used. To claiming less than 50 percent or half their expenses and that implies that they are drastically overpaying their taxes. It is surely a blooper to avoid claiming small insignificant figures. Ever a small amount like $5 should be added up in your claims. Hence, be accurate in your claim calculations and start developing the good habit of saving all your bills and receipts.
There could be numerous mistakes associated with funding. You may make the major mistake of choosing the wrong loan or the wrong lender. Moreover, your intention of going for a loan could be a major error of judgment on your part. High-interest loans could prove disastrous for your business’s profit margins and overall financial health. Robert Trosten believes that though it is quite easy to commit financial mistakes and misjudgments, it is not difficult to avoid such missteps. Here are some financial bloopers that every business must avoid.
Robert Trosten Identifies Blooper no.1: Employing the Services of Too Many before Real Revenue Comes In
You must necessarily be smart with all your money if you want your business to sustain and flourish. Hiring too many individuals even before revenues start flowing in, could prove to be disastrous for your business. You must strictly avoid counting your eggs even before they are actually hatched. You must be wise in your decisions. Be practical and hire your team once revenues have started pouring in and you have enough money to afford to pay salaries to so many employees.
Robert Trosten Identifies Blooper no.2: Taking Loans that You Simply Cannot Afford to
It could be pretty tempting to avail of a massive loan amount offered by your lender especially. When you are trying to establish a new venture and finances are pretty tight. However, it is a major mistake to borrow an amount that you cannot repay or afford. If you take excessive loans, you are exposing yourself to many risks over time. Your unwise decision could gradually eat away all your profits and your business would be in major trouble. You would end up ruining your business and even personal credit. As perhttps://www.forbes.com, you must stick to borrowing money judiciously. It is best to exercise certain reservations while borrowing money for your business. Borrow conservatively instead of taking out a huge loan simply because you need to make interest payments.
Robert Trosten Blooper no. 3: Overestimating Revenues
As per https://www.entrepreneur.com, entrepreneurs are ambitious and optimistic and generally have high expectations. They have unrealistic revenue expectations. It is of pivotal importance to keep all these critical numbers quite close to reality. Often revenues are reliant on certain external factors that seem to be not within the tight grip of the entrepreneur.
Robert Trosten Blooper no.4: Underestimating Costs
Startups often spend more despite budgetary constraints. Entrepreneurs must focus on strictly following the budget. You must avoid taking unnecessary big moves just out of excitement because they may not be fruitful and may blow your expenses out of proportion. It is of critical importance to keep all your emotions under control. Under no circumstances should you spend more than your budget permits. You must focus on starting small.
Robert Trosten Blooper no.5: Missing Out on Deadlines for Payroll Taxes
This is a pretty grave mistake and one that savvy business people can usually navigate past with relative ease. That said, they are always a source of anxiety and can be overlooked if you’re not being careful enough. When payday comes around for your employees, you also have a government-assigned responsibility to collect a portion of their wages as payroll taxes. This is a newer responsibility as the earlier system puts the onus on employees to deduct their payables and pay the government directly. Instead, you now have to act as a collection agent for all your employees.
This can go wrong quite easily; here’s an example. Let’s say you cut payroll checks but don’t set aside the liability for payroll taxes in a separate operating account. Eventually, these funds are mixed up with your operational funds. And give you an inflated idea of your finances.
What happens as a result is that you don’t intentionally withhold the tax revenue due, but end up entirely losing track of the liability. When employers do find out and try to get on top of such a situation, it is likely quite late, a huge backlog of taxes has accrued alongside late fines and interest, and the cash on hand is never enough to pay them back. There are two solutions to this, the first being maintaining a separate account for your payroll taxes, the other being outsourcing the responsibility to a payroll service that gives the issue the single-minded attention that it deserves.
Robert Trosten Blooper no. 6: Extending Lines of Credit
The vast majority of businesses do not need to offer credit to their customers. By opening up avenues through which you can lend credibility to your customers, you move out of your core competencies and become more akin to a bank or financial services provider. This is not an easy line to crack into and certainly not something you should be doing if it isn’t your main business. A lot of flop businesses fail due to the inability to manage cash and collect receivables. Accounts receivable that you are not able to recover credit from can be a long-term pain point and ruin your business.
As per statistics, 50 percent of the small businesses are not able to sustain over five years and experts believe that financial mistakes have been instrumental in their dismal performance and failure. There are numerous bloopers including underestimating, costs, overestimating sales, depending excessively on credit, poor overall financial management. Stay away from all sorts of financial missteps so that your business can thrive despite major competition.