What are some of the most common financial mistakes your business could easily avoid?
Believing that every profit will result in cash-flow – once you accept a project, it is tempting to quickly write down the profits you will make from the completed project as cash-flows to your business. Since you will be estimating the potential cash-flow after detracting the potential costs that you will incur during the project, there is a very good probability that your estimate can be wrong. To begin with, it is an estimate – and secondly, in most cases, profits come after the project is successfully concluded. To assume the project can be finished without any unforeseen consequences is to overestimate the potential amount of cash that could flow into the business, and thereby create an inflated image of the business’s financial status.
Not taking bookkeeping seriously – bookkeeping can be a drag, and it is common for many businesses to have books that have not been updated in months. This, however, is a fatal mistake. Not only can it cause delays and problems during the tax filing season, but it can also prevent you from correctly assessing the status of the business. Nowadays, there are many software that can allow you to maintain your books quite easily: a good example is Xero; accountants will often be glad to advise you on how to use particular software such as this, if you do not know how to.
Not outsourcing your accounting – if you have an accountant in your business, it is normal to let them do all of the accounting work (but it is still a good idea to conduct an audit every once in a while to confirm that all is well). The problem is if you do not have an accountant and still attempt to do everything by yourself. Whilst you might be trying to cut down costs, what you are attempting to do can backfire: it can increase your expenses. This is because unlike an expert tax return Brisbane or the like, it is easier for you to make mistakes. Not to add, it is almost impossible to be aware of every change that is made every year to tax regulations – who knows what new tax deductibles are added (which you could benefit from)?
Not applying proper budgets to projects – when accepting potential projects, it is always important to correctly estimate and allocate a proper budget to each. If you fail to allocate a budget to every new project the business starts, you can easily find yourself in the red: a project without a budget can easily exceed the profits, and you have no way of knowing when a project is costing you too much to be profitable. Always specify clear and realistic budgets to every project you start.