Business owners often learn the details of high finance by mistake. In some cases, the lessons can be relatively limiting and the damage is not too severe. But if those financial mistakes wind up being costly, then it could put the company out of business. That is why all business owners and managers should be aware of the four most common financial mistakes businesses make every day.
Investing in Non-Core Activities
If you manufacture shoes, then why are you worrying about how to upgrade your company’s computer network? A company that offers cable television services should not have to worry about providing excellent payroll services for its employees. That cable television organization should contract with a corporate payroll services company for an economic and effective solution, and the shoe maker should hire a computer support company that will provide computer network services for a low monthly charge.
When companies invest in non-core activities, they are wasting money. If you want your company to grow, then outsource your services to experts that can do those services better and cheaper.
Not Enough Insurance
Does your company have adequate life insurance policies on its key personnel? Do you have lost income insurance in case your facility catches on fire? Do you have enough business liability insurance to protect your company from potential lawsuits?
One of the biggest mistakes that business owners make is to fall short on their contingency planning by not having enough insurance. The worst attitude a business owner can have is to think that catastrophe could not happen to him or his business. If your manufacturing facility burns down or your customers bring a class action lawsuit against you, then your business could be in jeopardy. Analyze your current insurance coverage and make sure you have enough to protect your business in case of an emergency.
Business planning is one of the most important activities for a business executive. When you plan to launch a new product, you need to take every possible expense into account, and then add a cushion in case something goes wrong. More businesses experience financial hardships because of bad planning than almost any other financial issue.
Failure to Keep Accurate Records
It is extremely important to keep accurate records of all financial dealings. Make sure your accounting department is well practiced in record keeping, and is aware of all policies. Part of keeping accurate records is keeping timely records. Keeping everything up to date and accurate is keep to identifying currently inefficiencies and mistakes, as well as avoiding future pitfalls. Accurate and timely records will also keep your business out of IRS trouble.
It is always better to work smarter than harder. You do not want to put years of your life into a business only to lose it to one of the most common financial mistakes businesses make. Make sure that you follow the right planning process and work smart to avoid the financial issues that have put other companies out of business.
Haliegh Adams is a professional writer specializing in business, finance, and entrepreneurship. She enjoys the outdoors, hiking, fishing and spending time with her familiy.Suscribe to the podcast