Do you want to open a business? The struggle to become an entrepreneur is really not easy and in an instant. There are many risks that must be borne by every business owner. But on the other hand, the success achieved will be very beneficial for your life. Maybe you have a lot of brilliant ideas, a mature business plan, and a solid team, but if your business management isn’t done well, then those things could be useless.
There are many tips that outline how you can manage finances as an entrepreneur. But did you know that there are also many entrepreneurs who mismanage their finances to cause huge losses? Are you struggling to become an entrepreneur? Here are 10 financial management mistakes that you need to avoid as an entrepreneur.
Initial Capital Too Large
If you plan to have a restaurant; which one do you choose between the two ways below:
Spent a lot of funds to build a large restaurant
Start with something as simple as opening a catering and accepting orders online
Of course, the second choice makes more sense, is easy and the risk is very small. Small investments can grow and will be far safer when compared to opening a large-scale business directly. This strategy has proven effective because many online shops in Indonesia now have outlets thanks to the results of their sales. In addition, they have got repeat customers.
Combining Personal and Company Accounts
Combining your personal account with a company is not recommended for business management. You will have difficulty differentiating expenses and income for each need. Another reason is that you will tend to use the money for personal purposes. This overlapping financial management will affect your company’s operations and find it difficult to determine the actual profit figures. Get used to discipline sharing business and personal needs.
Funding Business Needs with Personal Money
Still related to the points previously explained, spending funds for business needs with personal money that you have is not recommended. It would be better if your credit card is not used to finance business needs because you will have difficulty making financial reports later. Ensure that all business needs, meeting expenses, or traveling are borne by the company’s operational finances.
Bad Debt Returns
At present, it is very easy to obtain business capital loans. Because there are many financial institutions both government and private that are willing to provide loans for these needs. However, many business people are in a hurry, namely borrowing without thinking about how to pay the credit. In the first year of your company, there will be many uncertainties such as uncertain income, profits that cannot cover capital, and so on. For this reason, financial management is needed that allows you to repay your capital loans prematurely. When your business starts to increase, you can make a bigger loan.
Not Preparing a Budget for the Future
At the beginning of the company, the business owner tends to playback all the profits they can to finance business needs. Actions like this can jeopardize the owner’s future because he does not have a definite amount of savings.
Koinworks x Look
“Rome wasn’t built in a day,” neither does your business. It would be better if you set aside your income for the next few months, just in case when your personal financial condition is unstable. We do not know what will happen in the next few years, therefore, set aside income to save.
Do not Have an Operational Budget
Every company must have operational funds. The biggest mistake of an entrepreneur is not having a budget for office operations. How do you measure profits if you don’t know how much money is spent by your company?
You can set a budget every month and increase the amount when the business is stable later. Do not get a peg larger than a pole.
Not Making a Retirement Plan
Every entrepreneur must have the desire to retire someday. Don’t you want to reap the rewards of your work for years? Pension funds are very important to collect from now on so that when the time you really do not work, you have enough funds to enjoy life. The retirement fund calculation can be done by a financial expert or set aside some of the profits that you get regularly.
Not Having Emergency Funds
This emergency fund is usually in the form of cash savings because it is an emergency and can be disbursed anytime you need it. In addition to saving and financing a company, you also must have an emergency fund for unexpected needs such as work accidents, consumer compensation and so forth. Emergency funds are important enough in financial management so that you are not involved in accumulating debt.
Greater Debt Than Income
If your financial statements continue to be in a deficit, that means there is an error in managing your business. You need to study the problem so that you don’t get into more debt. Don’t also borrow money from your company’s capital or pension fund. Over-reliance on credit cards will also have a negative impact on your finances. The tendency to swipe credit cards at every opportunity does not solve the problem but instead adds to your debt.
Doing too many promos
We live in a very competitive economic business environment in spite of the business that is involved. Your company will experience fierce competition. But not necessarily you have to give massive discounts to clients just because you want to win the tender. Providing price discounts that are too large can have an impact on the quality of the product or service and the profit that you will get. Determine the selling price in accordance with the capabilities and operational funds incurred.
Never underestimate the management of the business that you run, even though the business is still a small business or just starting. As an entrepreneur, the basics of finance must be considered from the very beginning of your company. After understanding financial mismanagement as explained above, it is hoped that you can plan your finances more wisely and carefully. Good luck.