In our business plans and documents, we always hint at having a lot of cash flow and revenue but it is always different when we venture into the business. In the business world, there is a difference between spending money to make money and just burning cash on expenses with no return. These expenses over time after consultations with a personal tax accountant end up not adequately accounted for as it lacks traces of proper bookkeeping. We will be discussing four things entrepreneurs waste money on
As a result, the challenge is to achieve business goals and objectives with the funds available. But if you can’t manage finances in order to meet those set business goals and objectives, it can become impossible to ﬁnd new sources of capital. Here are five of the most common ways entrepreneurs waste money especially those building businesses for the first time
FORGETTING PRIMARY FOCUS
Business owners need to understand that the primary focus of a business is to generate revenue. Most business owners especially young entrepreneurs prioritize other unnecessary tasks which oftentimes create extra expenses which are not always accounted for. At the early stage of a business, it is advisable to try hard to cut low expenses and focus more on generating revenue. These are the issues associated also with bad accounting
Before spending or acquiring expenses, ask yourself three questions;
- Is the purchase based on emotions?
- Is this purchase a mere want or a necessary need?
- Does purchase help acquire clients or revenue?
This would help you know what to spend and what not to spend on. It is quite very important also that an accountant is involved in the process of offering professional accounting consulting services to help guide expense management.
EARLY HIRING OF STAFF
Business owners make the great mistake of having to employ staff prematurely before the business even grows. Most of these mistakes are made before they have properly evaluated their needs.
The end goal of setting up a business is to make sales and generate revenue, this is why this mistake is prevalent, especially in the sales department. It is also advisable that business owners should employ professional help in Human and staff resources. This will help them ascertain the current level the business is at, the kind of staff to hire if they need to hire, and make other strategies to meet budget
BRIGHT SHINY OBJECT SYNDROME
Often referred to as SOS, this is the continuous distraction from planned goals and objectives. It occurs when entrepreneurs shift plans without completing the one in hand. It is a clear explanation of “a bird in hand is worth more than two in the bus”.
Always implement one task to completion before you pick interest in another one. This will save you resources for implementing different tasks without actualization anyone. At the end of the day, it is as if you are busy and making moves but there is really no result to show progress.
Here is a case of a young company with excellent products and services making revenue of over $100 Million annually. It was noteworthy, however, for its inability to be proﬁtable even as its revenues grew by 30% each year. Annual operating losses exceeded $20 million, and these losses increased with increasing revenues. How could such a promising company do so poorly ﬁnancially?
The reason was erroneous accounting, as became obvious when they paid a close look at their cost accounting. Most businesses especially young ones do not see the need to seek professional accounting services until they start to experience negligible losses which would be difficult to correct.