Common Spending Mistakes in Small Businesses

easy way

There is no denying that running a business is not always easy. There are plenty of challenges that reverse growth or halt progress. Precisely, if these challenges have a direct impact on business finances, it may cause several other risks that your business needs to face. In other words, managing finances is pivotal to stay on top. And if you’re a startup, finance management becomes as important as serving existing customers or finding new leads.

But, if you are like business owners who find managing money or bookkeeping a daunting task, you must know your common spending mistakes to stay ahead in the business domain. This is one way you can mitigate not only financial risks but also monitor the cash flow of your business. In other words, by controlling your spending and cash flows, you improve success chances and your profitability also.

We have enumerated a few common spending mistakes to help you steer clear of the financial management of your business.

Common Spending Mistakes in Small Business

1.     Failure in Keeping Personal and Business Expenses Separate

This might sound trivial to you, but many business owners when entering the business world make this mistake. Remember that you are in the early phases of your business, it is vital to keep the expenses separate. Although sometimes you need to rely on the personal finances to support business expenditures, you need to ensure that you h have a separate budget for your business.  Also, relying on the personal expense to fund business may cause problems in the long-term.

Once your business is operational and starts serving the customers, separate finances by making a separate business credit card. Make sure you have a separate bank account for your business. Doing so can be extremely helpful in managing tax problems and avoiding bookkeeping confusion subsequently.   It will also empower you to evaluate potential or existing cash flow issues and overall business finances before they turn into a major problem.

2.     Not Creating a Budget

You might find easy budgeting, but you cannot deny its long-term value that outweighs all initial stress and effort.

Creating a budget means analyzing how much have you earned and how much you can invest. An organized budget helps you make informed decisions about all business matters that include everything from supplies purchasing, staffing, and training to inventory. Conversely, when you work without a budget, all these tasks become challenging and may cause you significant cash flow problems. This particularly affects your business if it works with seasonal shifts, and you need this cash flow to maintain business operations during the slow months.

Fortunately, there is a wide variety of apps such as Scoro, Centage, and Adaptive insights that can help entrepreneurs not only create but also maintain a budget. Not to mention how these budgeting apps keep track of your business expenses and send you a handy report at the end of the month or year. This allows you to do preparations for tax seasons and review performance.

3.     Failure to do Financing at the Right Time

All business owners know that working capital is an essential thing to operate the business and increase its growth. If working capital runs low, your business might face a lot of issues that not easy to resolve it right away, and that may vary from unpaid bills, mounting fees to lower credit scores.  Not only that but making payrolls also become a challenge while tackling such issues. The situation may create problems when it comes to retaining your potential employees. The problems like staff shortage, inventory, and supply management lead to decreased revenues and unsatisfactory customer services.

Ultimately, the failure to meet your business financial obligations can impact different areas of business. That is why it is important not only to identify but also address the cash flow issues and to prevent poor working capital in a easy way. It is better if you seek assistance about taking control of financial matters before they become problematic for your business.

4.     Ignoring Poor Credit Scores

Recognizing the right time to consider alternative financing options like a line of credit or loan is important. However, your due diligence will not benefit you if you fail to qualify as a borrower. That means, it is essential to be vigilant about both your personal and business credit scores.

It is also important because your credit scores impact your ability to use financing solutions with suppliers or vendors. The arrangements often help business owners easy fill the gaps in their cash flow.  Moreover, with a good business score, you can reduce the insurance premium and interest rate on your loan.

Sometimes, your credit scores contribute to secure many affordable financing terms; particularly when you opt for loans, credit cards, and line of credit.  The phenomenon is confusing for many people since they are advised to keep their personal and business financing separate as an ideal practice.  

However, it is important to understand that when you sign a lending agreement as a primary applicant,  banks use your credits to determine your eligibility, repayment terms, and interest rates.  Customers are sent an annual credit report, and it is good to use it for your advantage.  Although the business credit report is hard to obtain, you can get them through various platforms.

5.     Overspending on Startup

When starting a startup, you are naturally optimistic that your business will produce good revenues if you invest a large amount in it. This optimism sometimes leads to overspending, which is another common spending mistake. To avoid overspending, research carefully about how much inventory or staff you need to take a good start.

Final Thoughts

When running a business, you may face many financial issues, and to plan for all potential scenarios is not easy. However, when it comes to cash flow, various things can be done to avoid cash flow issues. The most important thing is to be proactive in whatever approach you use to manage your business finance.  Besides this, budgeting and healthy credit scores play an important role in keeping business finance issues at bay.

Thus, the given spending mistakes are very common when a business is in establishing phase. However, you can avoid them by planning and evaluating everything in advance.

Access our network of Investors, get instantly matched with a Lender, or get a business plan by visiting us Funded.com

Ideal Approaches to Achieve Business Growth

Business GrowthThe business world is always adapting to changing consumer behavior and varying needs. Competition is growing, consumers are becoming ever-demanding, and more brands are entering the market.

To stay a float, it’s necessary that small businesses achieve more growth this year by employing the right strategies. This means that your ultimate goals should include having a bigger base of loyal customers. Higher rates of customer acquisition, and a productive marketing strategy.

Here are some great approaches to help you achieve business growth.

Set Key Performance Indicators

Start measuring performance via objectively measurable indicators. Whether you’re trying to assess your employees’ performance, marketing campaign, or customer satisfaction, KPIs can take you a long way. It takes the guesswork out of the equation.

It’ll help you measure how close you’re getting to achieving business goals. Another benefit of introducing KPIs to your organization is that you can report them to project shareholders conveniently.

Improve Customer Service

Customers need attention and if you don’t provide it, they’ll find a brand that does. Research proves that customers are growing impatient and frustrated when a brand’s customer service fails to meet the mark.

This year, you need to step up and improve your customer service by implementing live chat systems, updating FAQ pages on your websites, and responding to feedback with customized replies.

Nowadays, consumers prefer to do their own research at their convenience, rather than having to call a customer care rep during normal hours, when they’re busy too. This means that they’ll look up your website, and if they have any queries, the FAQ page is the first place they’ll look. To stay ahead of the competition, upgrade your customer service strategy.

Make User Experience a High Priority

UX is becoming a critical aspect of branding, now that a business’ role is no longer limited to just selling; consumers want to know everything about you. No matter how amazing your product or services are, they aren’t the only things that determine how a customer experiences your brand.

Now, they evaluate everything; whether your website is easily accessible if your customer care representatives respond quickly enough, and if your app is user-friendly. To ensure your customers get the best user experience, you’ll need to optimize your landing page, make your website easy to navigate through, and allow your audience to reach out conveniently. Once you hit the mark with all these aspects, that’s when consumers will start considering your products.

Enhance Your Content and Marketing Strategy

They say ‘Content is king’, but is your strategy up to the mark? Now, businesses don’t just sell services and commodities, and they’re generous with information and content. Consumers love to read about products and your specialty, so rely on your expertise to create engaging content that consumers will love reading.

Sharing knowledge only shows how your brand has the skills to cater to their needs, so it’s beneficial in the long term. Content is a part of your ongoing marketing strategy, and thanks to different social media platforms, you can be more flexible with the kind of content you create.

Develop Collaborations and Partnerships

Partnering with other brands can give you a boost, especially if it’s a company that can complement your services and products. By releasing special edition products, ranges, and combinations, you grasp the audience’s attention and induce the urgency to shop and spend money.

However, your collaborations shouldn’t be limited to releasing new products; you should also make sure to affiliate with influencers to market your brand in a transparent and consumer-friendly way.

Influencers are established experts in the niche, so having them on your side can increase customer engagement.

Take a Risk and Try Expanding

Although it isn’t necessary that your business expands over time, it’s always beneficial to venture beyond your range and enter a different domain. Taking risks is always a part of running a business, so you might as well expand your range of expertise while you’re at it.

If you’re a retail brand, consider releasing your own line of makeup, home decor, or artsy products. All ideas have their own unique charm, but it’s best that you listen to your customers first.

Start by experimenting with a pilot test and analyzing how your audience responds to new products. Based on pilot tests, you’ll know whether a potential business venture will turn out to be profitable or not.

Talk Data

Data analytics are changing the business perspective from a blur to a crystal-clear view. Now, it’s much easier to understand consumer spending habits and trends that are garnering the most attention. Relying on big data to help you make well-informed decisions and investments is no longer just a great option, it’s a necessity.

Deriving trends from numbers and statistics used to be a tiring and cumbersome task, but with the help of analytics and AI, you can get insights far more quickly.

Not to mention, they’ll also be accurate, when compared to insights derived by humans. The best part? Machine learning means that your analytics software will only keep getting better at what it does, so you won’t have an excuse to make a fluke.

Try Drop Shipping Services

Drop shipping is the newest trend for e-commerce websites when it comes to delivering merchandise to their customers. It gives you the benefit of not having to hold onto any stock; any order that your customer makes goes directly from a drop shipper to them.

The product will be complete with your brand’s label and name tag, so it won’t lack customization. In addition, it offers your brand greater flexibility to operate from anywhere.

Conclusion

Some of the best ways that your business can achieve growth by focusing on customer service, marketing, collaborations, and making an impression. While it’s necessary to take one step at a time, you need to be more productive in order to satisfy a demanding audience that is always waiting for something new.

Access our network of Angel Investors, Venture Capital or get instantly matched with a Lender, or get a business plan by visiting us Funded.com

Make the Right Choice: Should You Use Your Retirement Savings?

In the United States, it is very common for people to save up by opening retirement accounts. The problem with this kind of set-up, however, is that the money is expected to stay in the account until you reach retirement age. But what would you do in case of emergencies? Of course you can take out your money from your retirement account even if you are not yet retired. But you have to understand that this would lead to penalties and other tax deductions.

Most of the time, people open an employer-based or an individual retirement account that would be tax-free once they reach 59 and a half. The catch, however, is that if you decide to take some money from your retirement account before you reach your retirement age, it would usually be subjected to state and federal taxes on top of a 10 percent penalty. Yes, withdrawals will have tax deductions because these are considered as “incomes.”

Withdrawing your money before your retirement age is similar to pulling out an investment at the worst possible condition of the market. It’s like selling equities in a down market, a move that would nonetheless cut the probability of earning more from your business.

Thus, before meddling with what’s in your retirement account, you should try to look into other alternatives such as applying for a home equity loan, taking a line of credit, or asking a friend or family member for some money to borrow. These three are great alternatives, especially if you are expecting something some income in the future.

Aside from these, one must think about an intra-family loan which is a really good option since the interest rates set by the Internal Revenue Service are very minimal. In August, for instance, the interest rate was at a measly 0.3 percent for loans that will run for three years. For loans that will for more than nine years, meanwhile, Continue reading “Make the Right Choice: Should You Use Your Retirement Savings?”

Confessions of a Startup Guru: The Traits of a Successful Entrepreneur

Starting a new business is no doubt difficult. But for some, the task of managing startups is inherently easy and is usually enjoyable. Many successful entrepreneurs, for instance, wouldn’t let pass an opportunity to start a new business.

One of them is 36-year old Phillip Chipping – founder of successful mobile accessory company ZAGG. Chipping, who started founding businesses at the age of twenty-one, has a number of achievements under his name. These include, obviously, the success of ZAGG which he started in 2005 in his parents’ backyard.

Considering the small number of people who would need accessories for their gadgets, Chipping said that he never expected ZAGG to be very successful. Several months after the launch of his company, however, Apple introduced IPod Nano – a device that is very prone to scratches.

And while other companies are still thinking about the possible solutions for this, ZAGG already has one. Thus, despite the limited number of advertisements posted online, Chipping’s company started attract customers. And as the saying goes, the rest is history.

According to Chipping, ZAGG started only with $500 daily sales and two members. Following a single press release, however, it rose to $10, 000 and a couple of neighborhood scouts. After one year, his company finished with $750, 000 in sales and dozens of workers.

Chipping left ZAGG in 2008, a year after the company went public through the OTC market. ZAGG, which currently has a market cap of $300 million, joined the Continue reading “Confessions of a Startup Guru: The Traits of a Successful Entrepreneur”

Finding Alternatives to Convertible Bonds

For many startups, convertible bonds (also known as convertible debt) are one of the most common sources of financial support. This type of simple and inexpensive agreement helps entrepreneurs strengthen their companies and prevent it from collapsing immediately after its establishment. Despite its enticing promises, however, there is an apparent negative side to convertible bonds – the presence of debts.

In various articles, several successful entrepreneurs have noted the increase in the number of startups that are burdened with debts because convertible bonds. Perhaps some investors would argue that the bonds are nothing but equity investment. Technically and legally, however, these are still debts which are yet to be converted to equity in a future investment round.

Convertible debt is not an issue in startups that are doing well in the market. However, in bad situations, the bonds (technically, the debt) should not be seen as the company’s savior but rather its possible cause of collapse.

Some well-established entrepreneurs note that the problem with these types of financial support is that it gives the investors the opportunity to call for the debt anytime after the end of the so-called conversion period. Like what was stated, this is not an issue in successful startups. But for those that are facing problems, this might spell the company’s doomsday. Imagine an investor calling for the debt at the time of your company’s struggle to stay in the business – simply unacceptable.

With the increase in the amount of funds funneled into startups across the United States, the problem with the ballooning of debt due to convertible bonds must be addressed. This problem is not obvious in most startups in Silicon Valley. In other areas, however, it is very evident.

With this, company owners should be made aware of the negative aspects of the agreements that they are tempted to accept. In the case of convertible debts, entrepreneurs should consider looking into other possible financing deals such as what some entrepreneurs dub as the “convertible equity.”

While convertible equity has the similar functions of convertible bonds, the former’s difference from the latter is very significant: there is no debt. Convertible equity is the convertible Continue reading “Finding Alternatives to Convertible Bonds”