Over the past 35 years, I’ve seen hundreds of clients from all walks of life and have been chatting to business owners about the challenges they face.
They often talk about the mistakes they made and with hindsight, what they would have done differently. So, in this column, I thought I would share with you what I think are the five most common mistakes business owners and entrepreneurs make. Hopefully, you will steer well clear of these but if you need help, please get in touch.
- Cash is always king. So many business owners get hung up on turnover that they forget about the cash position. It’s all very well striving for more and more sales but if you are offering extended credit terms to achieve them, this can have a disastrous effect on your cash flow. The initial solution is to prepare a cash flow forecast and profit projection which will highlight where any future deficit is likely to arise.
- Not having a plan. If you don’t have some sort of plan, how do you think you are going to get where you want to be? This is easy to solve. Work on a five year plan to determine what you want from your business, where do you want to be and how are you going to get there.
- Taking out too much money too soon. It is often very tempting to see the money in the bank and think, well it’s been a hard month, I think I’ll take a bonus this month. In general, you can’t take any money out of a limited company bank account without it being taxed in some way. So not only do you have to keep money aside for income tax, there is also VAT, Corporation tax and PAYE to consider. So always make sure you have enough reserves to be able to keep HMRC happy.
- Keep accurate records. Make sure you have a good financial management system in place. It can be as simple as using one of the cloud accounting packages out there, such as QuickBooks, Xero or Sage. Don’t go to your accountant and ask him “How have I done last year?” as you should already know. How can you make decisions if you don’t know how well you are doing?
- Get a great accountant! OK so it’s now time to blow my own trumpet! But seriously, you should get a good advisor who will help you through business, someone to bounce ideas off and help you navigate the way round all the financial and regulatory requirements. They will also have worked with a range of businesses over the years and can pick and choose some great ideas that might just be able to help you.
So that’s my top five. What are yours? I would love to hear from you.
by Steven Glicher, email firstname.lastname@example.org