By CHINKEE TAN
HANDLING money in business sometimes can be quite complicated.
How to balance your sales versus expense? How to manage your cash flow? How to determine your income from the gross sales?
In business, sales matter as well as the revenue and the expenditures. One can have huge sales, high revenue but also have cash flow management issues. For business people, it is understood that cash flow is what keeps the power on and the employees reporting to work.
Now let’s see the four common mistakes in handling business finances so we can avoid them:
- Spending too much money on sales and advertising
In business, we need to spend money to earn money. However, some entrepreneurs today seem to spend too much on pouring in the money to support the sales or marketing with high hopes of translating all the money used to actual sales.
While this strategy has mostly worked, it is not guaranteed to bring back the money used. Marketing and sales are very important. Bottomline is still translation. If we fail to evaluate the return of the investment we put into these strategies.
What to do: We need to make sure that we are getting the right returns for the investments made and not blindly pouring in money that could just increase the business expenses. The key is not to just spend money without calculating the returns.
- Failing to cope with change
It’s not a question that everything today has been improving with technology, and businesses are directly receptive of these improvements. However, a lot of business people still have the tendency to do things (in their business) the old way, that is, failing to level up in terms of software use, cash flow management strategies, or even business reports generation thinking that they can save when they stay low-key.
But chances are, these business people who do not level up with technology can end up spending even more. A very classic example is generating the sales report: Old school way uses paper and pen to record sales, which by the way
- Failing to prepare business emergency fund
There is a reason why doing business is considered a risk. We just do not know what happens next. Our best sales person can probably leave us for another job, our biggest investor can withdraw his investment or as simple as having our trusted equipment give up on us.
All these unexpected happenings need to be thought of as early as starting the business, this is what the emergency business fund is for.
So what happens when businesses fail to have an emergency fund? Same as what happens to everyone else without a shelter or an umbrella during a heavy rain! Yes, rainy days are inevitable, even the sunniest skies can bring rain these days. Everything is just so unpredictable and when it comes to business, so few businesses prepare for these misfortunes.
What to do: Consider saving money. It may be difficult especially when business expenses take up almost all of our money but just like personally saving our money, we will surely reap the results of saving money in our businesses.
Reminder our end goal in business is to become profitable. A business that makes no money yet still operates is called CHARITY. At the end of the day, we want to run a profitable business.
If you want to start your own business but do not know where to start, good news! I will hold a special session called “Juan Negosyante: How to Start Your Business from Scratch” on Sept. 28, 9 p.m., via private group FB Live. For more info, call Carlo 09209494975 or visit chinkeetan.com/juannegosyante.