Perhaps the most significant financial management mistakes made by entrepreneurs is recruiting the help of a bookkeeper or accountant and not making a concerted effort to understand their finances.
It’s never wise to completely outsource your financial decisions to your bookkeeper or accountant, as it’s in your best interest as an entrepreneur to better your financial acumen.
Let’s explore common financial mistakes made by entrepreneurs and the solutions for each one.
1) Ignoring our finances in the hopes of them getting better by themselves.
Many people have a prevalent phobia of numbers or believing that finance is too complicated for them. However, the reasons are irrelevant if you desire to be a thriving entrepreneur. Simply put, entrepreneurs should have no business to be in business if they’re unable to handle finances. Business is effectively measured by the financial results it produces.
The solution
Ensure that you have a basic understanding of your financial statements. It’s of vital importance to realise that financial statements are not solely prepared for tax purposes, in fact, they’re an essential management tool for business owners to assist in the understanding of the financial position of their business.
2) Failing to keep expenditure records.
By not holding onto slips in date order or filing them correctly, will result in your accounting reports inaccurately reflecting your real financial situation. Often when this happens, it means that business owners are mixing their personal and business finances.
The solution
Ensure that you record every transaction. It would be best if you strived to keep a daily tally of how much you’re earning and spending. Hold on to every receipt and make sure you’re taking photographs of your receipts or photocopy them as they often fade. Submit all source documentation to your accountant weekly or consider backing them up with an online system.
3 ) You’re unable to read or understand your statements.
Many entrepreneurs manage to hold onto records but are actually unable to read or understand financial statements in order to make sound decisions about potential improvements.
The solution
Ensure that you’re continually educating yourself. You can start by reading finance books or articles daily. Doing this will help bolster your financial acumen and skills. Moreover, short business and entrepreneurship courses are an excellent idea for business owners seeking to deepen their financial knowledge.