3 Costly Money Mistakes To Avoid
It seems the more money you make the more you spend. It's costing you even more yet you still haven't had time to look at the numbers. But PayPal says you're winning. Yet you were only able to take a small amount for yourself if anything at all. You love your business but lately, you feel like it's time for you to stop investing in it and actually pay yourself. Only one problem, you're not sure exactly how much you'll need to make or what it cost to run your business. It's also still bothering you that you haven't achieved your financial goals this year, even though you made more money than last year. Something has to give, you have to get a better handle on it.
I can tell you that not keeping an eye on your money can lead to you being part of the 29% of businesses who run out of money or the 82% who fail because of cash flow problems. Managing your finances doesn't have to be this long drawn out process, if you get the right system (Quickbooks, Xero, Freshbooks, etc) and develop a strategy that works for you, it'll go smoothly.
Here are the 3 costly lessons I helped my clients work through, hopefully, you can learn from their mistakes as well.
1. All your money is going into your personal account. Don't start 4th quarter without a business bank account specifically for your business. No personal transactions in it. Attach your PayPal or whatever payment processors you use to this account. This is a HUGE no-no if you are an LLC or Corporation, business funds need to be in the name of the business and in a business account.
2. Not having a spending plan. You have these amazing revenue goals to hit 10K, 30K, and then you hit them but at the end of the month, you have no clue what you spent it on. Your savings is still low and your debt is still high. Set aside time to think of one or two financial goals that can be accomplished by the end of the year or quarter then figure out how much money you need to generate to achieve that goal. Now here's the key, actually, use the money for its purpose. Here's a fun way to tie your sales & goals together, tie a product or revenue stream to a specific goal. Here's what I mean, you've been putting off creating a new product, create the product with the specific purpose that all the money you make goes to increase your savings account. Win-Win.
3. Not having any system in place. Not looking at your finances at all isn't a good business practice regardless if you're making $100 or $100,000. There are so many bookkeeping software systems available to simplify & make it easier for you. You can link it to your bank account, PayPal, and it does most of the work for you. You go in to classify transactions and review. Now it doesn't sound so hard, does it? See, don't let these things intimidate you, have the same fearlessness to manage your money as you do to make it.