Major Money Mistakes That Small Business Owners Make
If you have a business in Michigan, it’s critical to stay on top of your finances. The truth is, financing is just as important as finding new customers and retaining existing ones is. However, if you are like most small business owners, you should know that bookkeeping and managing money is a common problem. The best way to stay ahead of the game is by preventing some of the major money mistakes that small business owners make.
Ready to improve your chances for success, and increase your profitability? Below, Business Loans Michigan lists some of the common money mistakes for small business owners and how to avoid them.
Failing to create a budget or sticking to it
Not having a budget for your business expenses is a mistake you should avoid. If you don’t have a budget, or you don’t pay attention to the one you created once upon a time, you will probably forget about all future tax obligations, ongoing expenses, insurance payments, etc. That is why you need to learn how to create a small business budget.
This is one of the main causes of business failure. Small businesses and startups often have it, and it firstly shows up when they start making money and underestimate all the expenses they will incur. You can have plenty of sales, but unless you get paid in advance for them, you will have expenses to pay before collecting from your customers. The problem shows in growing businesses that serve bigger customers or wide markets, but later on need cash to pay for their growing staff, payroll taxes, or overhead expenses.
Overspending in the first months
Next up is the issue of overspending. To prevent it, you’ll need to be realistic about how much business you will do and how fast you will be able to start bringing in new business. However, being too optimistic can lead to overspending, which is why you need to carefully research your needs, put a business plan in place, and create a realistic budget for your business.
Mixing business and personal funds
Whether you are new in the business world or have been running a business for a while, mixing your personal and corporate funds is a recipe that leads to disaster. First of all, you will likely have difficulties keeping track of how much money the business is making or losing throughout the year. Also, you will have big headaches with the tax reports, and will find it difficult to get a business loan in Michigan if you ever need one.
Waiting too long to seek out a loan
Plenty of business owners think that loans are bad for their economic stability. In reality, getting a loan is one of the best ways to grow, expand, update your equipment, invest in new technology, relocate, or hire additional staff. There are plenty of funding sources nowadays and with online business loans, you can get approved in a matter of days using only a simple application form.
We hope that this article helped you understand and prevent some of the costly mistakes business owners make. Now, you can check out our business loan offers and get in touch with our loan advisors for more information on this subject.
Why Business Finance Is Important During Growth Years
If you are new in the corporate world and want to learn more about growth, you should know that business finance plays a major role in successful running of a business. You can’t really get any business off the ground without investing some money into it. But how big does an investment like this have to be, and where do you get it?
What Is Business Finance?
The term business finance basically refers to the practice of managing your money as a business. Obviously, this term can also be a bit vague (especially for new business owners) but covers everything from buying equipment to handling taxes, selling assets, or borrowing money. Some of the most common categories here include:
Each of these relates to the overall flow of assets within a business, which is why you have to maintain a careful balance between all of them. Even one misstep can lead to financial troubles that may last for years or decades.
Types Of Business Finance
In business finance, there are generally two main categories you should be aware of. The first one is debt, or borrowing money from an existing institution such as a bank, and returning the money with interest over time. The second category is equity, which means selling shares of your business to investors. In practice, both of these categories are combined to maintain a solid cash flow.
Next, we have short-term finance, medium-term finance, and long-term finance. As the name implies, short-term finance covers a short period of time which is up to a year, medium-term finance covers a period of 3 to 5 years, while long-term finance are the actions you do for longer periods such as equity capital, preference capital, term loans, debentures, etc.
The Need For Business Finance
If you are wondering why you would need additional finance for your business, there are plenty of things you can do with a simple business line of credit or a term loan, for example. Some of the most common reasons for business financing include:
We hope this guide helped you understand the concept of business finance and the ways you can finance your business for growth. Now, check out some of the best business loans in Michigan and use our online application form to apply for your loan today!
The 5-Step Guide To Financial Recovery After COVID-19
The effects of COVID-19 are still visible all around the world, and the global efforts to contain the outbreak through mobility restrictions have caused drastic shifts in consumer demand and behavior. The financial recovery of businesses is kind of asymmetrical – amidst all of this, economic recovery is crucial in the return to a normal world.
However, such a form of expansion needs to happen on a broad scale with plenty of resources for businesses in all areas and sectors. And while governments are easing restrictions in stages, business will recover at varied paces based on their industry and geography. If your business has been hit by the pandemic, it’s time to think about financial recovery. Below, we are listing the five steps you should consider and start with the recovery process.
1.First of all, think about health and security
COVID-19 is a human problem that requires a proper health response in order to protect more people. In the business sphere, this means starting with health and security – you should make sure you have implemented some of the best practices to keep your employees safe and prevent further transmission. Safe distance protocols, plexiglass barriers, masks in some areas or vaccination entry only are some of the common practices.
If you can’t make this work, make sure there is a way for your people to work remotely. Be sensitive to the financial distress that your personnel may be experiencing and look to build employee loyalty above all.
2.Prepare a communication plan
A solid communication plan should target employees, customers, and suppliers. It should voice a clear and concise message, schedule regular updates and use technology to send out messages to everyone. You should put someone you trust in charge of your communication plan – ideally, look for someone from the HR department to lead it.
3.Contact your customers
Contact your customers and confirm that business is as usual and all the orders or services are on track and/or available. You don’t really need to renegotiate payment terms, but you may need to defer production or loosen some of the terms. There will be some changes in your cash flow, which is why you need to understand the financial impact of these changes and develop a forecast that reflects the changes.
4.Reach out to your suppliers
When it comes to suppliers, there will probably be some delays, so make sure you contact them and know this early – all so you can manage your customers’ expectations and update your plans.
5.Evaluate your capacity, resources, and cash flow
An aligned workforce is the best way to work towards your new projections. Demand may dip, which is when you will want to realign things and see where you can shave costs and discover some other more sustainable cost savings from which you can benefit after recovery. Question which expenses are really necessary and optimize your budget.
If needed, you can always seek out business loans in Michigan and get up and running again at full capacity – there are options with flexible repayment plans and good interest rates. For more information about corporate financing, contact us today!