In my last blog, I looked at seven of the most common financial mistakes that small training businesses make and how you can avoid them. The topic obviously struck a chord with many of you, so I wanted to share six more money mistakes that you might be making right now and what you can do to overcome them:
1. Not outsourcing or automating
In an effort to save money, you may be trying to run your business alone. In reality, though, you could be spending too much time on tasks like posting on social media, blogging, and bookkeeping – i.e. tasks that you can’t bill for – when you could be focusing on billable services.
Sometimes doing everything yourself is a false economy. A Virtual Assistant, bookkeeper, social media manager, copywriter, or designer may be able to create content with far more efficiency and quality in half the time, simply because it’s their specialism. This means that you can be earning while they’re working on your behalf.
Tip: Even if you don’t want to outsource, there are tasks like social media posting or sending out your latest newsletter that you could automate to a certain extent to save time.
2. Not seeking professional advice
Many businesses hold back from seeking professional advice about their business because they worry it will be too expensive. Talking to an accountant, solicitor, business bank manager, or financial adviser about your business could help you to save money or spend it more profitably. Think of it as an investment that will pay for itself many times over in the long run.
Tip: Ask for recommendations from within your network for professionals who offer affordable financial advice and have made a positive difference to one of your contacts.
3. Relying on future revenue
As we saw at the beginning of last week’s article about money mistakes, many freelancers are owed in the region of £5,000 at any given point in time. Knowing this, it’s all too easy for businesses to spend money based on a client’s promise that payment is pending. It may be tempting, for example, to take out a payday loan, believing that you will be able to pay it back as soon as your client pays up.
Unfortunately, non-payments can and do happen. It’s prudent to only ever rely on money that you actually have in the bank rather than the promise of future revenue, even if it is for work that you’ve already completed.
Tip: Look at how you can improve your processes to get clients to pay on time, every time you invoice.
4. Failing to plan
What’s the saying? “Fail to plan then plan to fail” – I think this is very true.
It’s important to take time to note down your forthcoming expenses, earnings, and so on. This will help you plan your finances for the weeks and months ahead.
I’d also recommend keeping an eye on the metrics for any marketing campaigns or events you run so that you can determine the return on investment (ROI) for any expenditure. This will help you see whether you’re spending your money in the right places and plan your budget for future activities.
Tip: I found a handy Cash Flow Forecast template on the British Business Bank website that you might find helpful for planning your business finances.
5. Poor accounting practices
Are you someone who keeps on top of their annual accounts throughout the year or do you have a mad week just before the tax return deadline when you scramble around for old receipts and promise yourself frantically that next year you’ll be more organised?
Poor accounting practices mean that you may forget to claim for certain expenses (see point one above) or that you miss the tax return deadline and end up incurring an unnecessary fine. Without a proper routine in place, invoices may also slip through the cracks, going out late or not being chased up as soon as they become overdue.
6. No safety net
Because of a combination of the common money mistakes above, many small businesses find that, when work does go quiet or an emergency happens, they have no safety net in place. Ideally, you should have at least two months’ worth of operating costs in the bank to tide you over during a quiet period.
Tip: Work out what you spend during an average month and multiply it by two. Do you have that much in your business bank account? If not, saving this amount for rainy days should be a priority.
If you’ve found this article helpful, please feel free to share it with your network.