Written by Salina Jivani
Most people can only dream of gaining freedom from their 9-5 job. And, unfortunately, a handful of the few who are brave enough to strive for it and try their hands at business fall flat on their faces very quickly. In fact, according to Bloomberg, about 80% of small businesses fail after only 18 months at the reigns. Although it’s difficult to pinpoint just a single reason for this failure, there’s one that’s most common: problems managing money.
This can mean a number of things from business owners not knowing how much they can safely pull from their business to their not understanding how and when to allocate funds so that all the bills are paid on time. In any case, you can take some precautions to make sure you avoid this costly mistake for your business:
- Don’t pull money out of the business for the first several months until you understand how the cashflow works and how much you really have leftover
- Keep a detailed log of your ins (credits) and outs (expenses/costs); in other words, maintain an impeccable bookkeeping system
- Be sure to close the month out to see how much you’re left with once everything is paid
- Create different bank accounts for different expenses, if that helps you better manage your cash flow
- Consider your tax obligations and make sure there’s enough money aside to pay for taxesLet’s face it; at the end of the day, understanding cashflow is not everyone’s cup of tea. You might be a great at all other aspects of business management, but accounting might not be for you. In that case, proactively owning up to your weakness can in truth translate into a great strength. Consider hiring an accountant before your business runs the risk of becoming a statistic. The extra investment could save you hundreds, even thousands of dollars in debt, not to mention a bruised ego, in the long run.