As an SME, keeping control of your finances is of the utmost importance. However in a time of future economic uncertainty and the leaked Brexit impact reports showing that the UK will be worse off overall, this can be difficult. This is why we have correlated a list of the top 3 financial mistakes to avoid in 2018. To ensure this year is not the year that you encounter cash flow problems:
- Emergency Funds
You never know what may happen in the future so have ensure that you have a contingency plan ready for any hurdle you may face. Having a three-month emergency fund is also a recommendation that many businesses follow, as it allows you to save money as it comes in and not spend more than your means. It is reported that a number of small businesses fail due to a lack of capital or a lacklustre approach of using that capital. So allow yourself and your business the leeway just in case disaster does strike.
- Late Payments
There seems to be a late payment culture in the UK, which can result in a crippling effect for your business. This is why clients should be given a reasonable time, such as 14 days, to pay an invoice. After this amount of time, you may need to use the protective policies that you have put into place. This can be difficult, as you may not want to harm the relationship you have with the client, but you may harm your business if you don’t. When it comes to your own debts, ensure you pay them on time, otherwise it may affect your credit score, as well as your relationship with that business. Having a payments solution can help you to keep track of both your accounts receivable and accounts payable.
- Separation of Business and Personal Funds
When you are a small business owner, it can be difficult to ensure you don’t fall into this dangerous and most common pitfall of combining your business and personal funds. This is a bad idea for numerous reasons. One of which being the complications around balancing accounts, filing taxes, ability to measure profits and financial goals. We would advise that you open a business account that has its own credit card and only use it for business purposes. Thus allowing you to keep your business and personal funds separate.