Business Basics: Money Management Mistakes to Avoid

One of the biggest mistakes that small business owners make when it comes to taking care of their money is assuming that money management is a talent. This is not true, because money management is a skill, and, like any other skill, it is learnable.

Sometimes, too, people can learn this skill fairly quickly by making fewer mistakes with their money. Let’s take a closer look at these five mistakes business owners often make to learn how to avoid making them.

Mistake #1: Business Owners Live Above Their Means.

Many people spend far more than their income. They make this mistake in their business and in their personal lives, too.

Those in the upper-income bracket typically spend 3-5 times more than they earn. Many people use credit cards and buy unnecessary items. Often these small purchases add up. People often spend more money than they realize.

If people are living above their means, chances are they’re making plenty of other mistakes with their money, too. That’s why it’s important to stay on track with spending by creating a budget. It doesn’t matter if people have been overspending for years—it’s never too late to change.

Mistake #2: Business Owners Fail to Pay Their Bills On Time.

Financially savvy business owners people pay their bills on time. Those who struggle with managing their money rarely get it done on time. Often it’s simply because they don’t take the time to figure out how much they owe on their bills and when their bills are due.

When businesses are late paying bills on time, they’re damaging their credit score. Their credit score also negatively affects how much interest they pay on their credit card. Too often, people don’t pay their bills on time because they’re not accustomed to doing it.

While it’s hard for people to stay on top of their bills when they’re struggling to keep their business going, they might still continue to ignore those bills even after they have a steady clientele. When they have a steady flow of income, they need to prioritize their bills and pay them on time every month.

Mistake #3: Business Owners Never Get Around to Creating an Emergency Fund.

It’s never too late to set up an emergency fund. The money needs to be kept in a separate saving account to avoid getting tempted to borrow from it. Business owners can build an emergency fund by calculating the amount they want to save and then making a plan to save some money every month from their paycheck.

It’s especially beneficial for people to make their savings as effortless as possible; for instance, automatically transferring a percentage of their income to their savings account.

Another way people can grow an emergency fund is by taking advantage of unexpected money they receive. For instance, if a business is surprised by a large tax refund, it should not celebrate by going on a shopping spree or handing out employee bonuses. Instead, they should save their tax refund.

Mistake #4: Business Owners are Careless About How They Handle Money

Making money is what business owners do, but some focus more on bringing the money in than taking care of it properly. Those who are not careful with their money might get careless about backing up financial data and about balancing the till at the end of the business day. They might also keep money in unsecured places rather than use timed safes.

Mistake #5: Business Owners Get too Busy to Learn About Money Management

While many aspects of money management are common sense, there are many aspects of money management that require study. Taking a formal class or reading about money management techniques will help a business owner prosper. Taking business classes or employing experts, such as Woodward & Co business accountants, is a great way to get around the problem.

By avoiding making these five common money mistakes, business owners can easily learn how to be successful with their money.