The Biggest Mistake Small Businesses Owners Make

Businesses fail for all different types of reasons. From running out of money to management committing fraud, no firm is immune to the pitfalls of the business world.

However, there is one major mistake that's a surprisingly large number of business owners fail to recognize, and it's for this reason that the dream of running a successful business tends to evaporate.

One main problem

Unsurprisingly the same problem tends to affect a surprisingly large number of people around the world; financial planning.

You might fall asleep at the very idea of compiling a sensible financial plan, both yourself and your business, but if you are to succeed this is essential.

No business will succeed unless it is making more money then it is spending. Similarly, no person will be able to save for the future or remain solvent unless they are spending less than their wage packet.

An enormous amount of small businesses seem to believe that financial responsibility is an afterthought. Nothing could be further from the truth. The most prominent risk facing small businesses is fiscal, and to make a company work, you need to know what's coming in, coming out and how you can improve things if you want to grow.

In my conversations with peer-to-peer business lenders, as well as nonstandard finance providers, in many cases they find themselves chasing business borrowers for the correct, up-to-date figures--even several quarters after the year-end.

A delay might be acceptable for a fortune 500 company, with many operating divisions and tens of thousands of employees, but for small business, it's a huge thorn in the side for growth.

In conversations with accountants, the same trend shows. Accountants spend vast amounts of time dealing with businesses that struggle to make ends meet because their books are not up-to-date.

Also, misreporting, missing deadlines and owners that have no idea of their financial responsibilities are all problems. In some cases, owners have had such little grasp of the finances that their completely innocent transactions have put the business into financial difficulty.

Make the most of the tools available

Firms in the early stages of growth of the most vulnerable, which is why owners must do everything they can to make sure that the business does not waste its resources.

An up-to-date view of finances can help you as a business owner determine where costs can be cut if needs be, and where you can improve operating performance to improve the bottom line. If you don't keep your figures updated and you find out six months too late that you've been spending more than you can afford, the firm may have already fallen into a position that is difficult to recover from.

Luckily, it's never been easier to manage your businesses finances than it is today. Apps and cloud-based software enable real-time monitoring, even if you operate several premises.

Technology makes the process easy

Technology has made this whole process super easy, so easy that even if you don’t know a thing about finance you can monitor the situation.

Accounting apps such as Xero and Sage One accounting are cloud-based services that are relatively low cost and can track everything. These services sync to your business’s bank account, so there’s no need to spend hours inputting transactions.

At any point, you can consider your firm’s data, find out what’s working, what isn’t and what you can tweak to improve profitability.

Even if you’re not good with numbers, both of these services can be altered to present the data in chart form -- the fastest way to tell if you’re making a profit and how much cash the business is generating.

As well as general accounting, services are available (standard with Xero) to manage your financial documents, upload expenses claims on the go, log VAT and manage payroll functions. There’s no need to spend hours putting together the figures every month and waiting for your accountant at the end of the year.

These apps are designed with ease of use in mind, but if you’re no good with the numbers, there are other solutions available.

Sites such as Upwork and Freelancer have revolutionized the employment market. If you need a finance manager for just one hour a week, you can hire a freelance accountant on one of these platforms. The flexibility and cost is just what small businesses need. There’s no obligation to hire for any period that does not suit you, and you can control what you spend.

This is a small price to pay to make sure your business is on the right path financially, and that you’re not making any serious mistakes that could destroy your dream of running a business.