We all have our bad habits, but which of yours are stopping your business from meeting its full potential?
With so many external forces impacting your business this year, it can sometimes be difficult to see our own internal bad habits.
Every business owner wants their company to succeed, but even the most successful of entrepreneurs can find themselves falling into these harmful patterns.
Here are some of the most common, bad financial habits that could be hurting your business - and how you can avoid them.
5 bad financial habits that are hurting your business
1. No emergency funds
One of the biggest risks to small businesses, especially during a recession, is not accounting for emergency funds. Businesses who are too focused on expansion, for example, may not be seeing the forest for the trees. Surprise expenses and new liabilities can always be just around the corner. Emergency working capital can offer a much-needed buffer in case the worst does occur.
2. Stagnant cash flow
Positive cash flow is crucial for any business to survive. However, even the best companies can fall out of rhythm with their cash flow, and it’s not always their fault. Stagnant cash flow most commonly occurs from unpaid invoices, but not managing your accounts receivables efficiently can amplify this problem.
You can use the Cashflow Statement to learn a structured way of measuring your business’ cash flow to better identify any problems. For more information on how to improve your cash flow right now by using an invoice financing facility, read our guide.
3. Forgetting to gamble
Another bad financial habit a business owner can have is not knowing when to take a gamble. Risk taking is a major component of a successful business. Business owners know they’re taking a risk just by launching their company, but it doesn’t stop there.
If you’ve found a steady level of success, but aren’t considering potential growth opportunities, your profit growth and cash flow may become stagnant. Knowing when to diversify and spend on necessary growth elements for your business is an important financial habit to build. By playing it safe you could be missing a window of success that would take your business to greater heights.
4. Having your eggs in one basket
A business can also suffer if its owner is suffering from tunnel vision. Perhaps your bad financial habit is obsessing over one aspect of the business and funnelling any additional cash towards this, and only this. If you’re putting all your time and resources towards one business goal, such as the launch of a new website, you may be neglecting other parts.
Once this new website is up, for example, are you financially able to manage returns or refunds? Do you have a strong enough marketing budget to promote your new look and feel? Do you have enough in the bank if a major part of your manufacturing or shipping were to break down?
5. Budgeting for seasonality
Managing cash flow seasonally is crucial for the financial success of a business. Business owners need to be able to pay for basics like rent, salaries, merchandise, shipping, utilities and more even in a slowdown period.
For example, are you budgeting for your slow-down period to ensure your expenses will be covered? Are you managing your inventory carefully to keep track of any excess that can be marked down or sold for profit in this off-season? Or, if your business does its best sales at a certain time, are you remembering to budget in advance for any temporary staff you’ll bring on payroll?
A cash flow forecast can be critical in helping businesses budget for seasonality. A cash flow forecast examines your projected income and expenses for a chosen period of time. It does this by looking at your likely sales, costs, and when you expect to receive payments.
If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].