20 Big Money Mistakes Business’s Make in 2021

Money or the lack of money, will always be the biggest challenge and concern for a small business owner -  This can be natural for being a business owner, although it can be very stressful and force you in making the wrong financial decisions that can have fatal consequences. Here is some common and big money mistakes small business owners make and how to avoid them to ensure success for the long run.


“Business analysts agree that “Money Management” is the number one factor responsible for business failure. ”

20 Common Money Mistakes Small Businesses Makes 

  1. 1
    Declining or Low Profits
  2. 2
    Reduced Margins due to price-cutting
  3. 3
    High Costs
  4. 4
    Lack of Adequate Cash Flow
  5. 5
    Poor Credit Control
  6. 6
  7. 7
    Owner’s Overdrawing’s in relation to business’s profits.
  8. 8
    Incorrect Pricing Structures
  9. 9
    Over or under quoting to get the business
  10. 10
    Unable to establish ‘true’ cost of products
  11. 11
    Uncontrolled Growth
  12. 12
    Poor Working Capital Management
  13. 13
    Poor Management of debtors, creditors
  14. 14
    Poor Cash Flow Management
  15. 15
    Poor Financial Controls
  16. 16
    Insufficient Management Information
  17. 17
    Inadequate Financing
  18. 18
    Over Borrowing
  19. 19
    Big Projects or Clients
  20. 20
    Premature Expansion

6 Biggest Money Mistakes Responsible For Most Businesses Failure

The Biggest Money Mistakes we make and that leads to the most business failures can normally be attributed to one of the following indicators:


Poor management

The business owner often does not have the relevant information regarding business performance, and consequently may not know when a situation requires corrective action, often relying on information contained in annual financial statements, which are sometimes prepared six months or longer after financial year-end.


Inadequate financial controls

Lack of financial controls is a major problem; usually implying that management is unable to identify the products, or customers, which are losing money. This leads to a situation where business owners run out of cash and are unable to pay their accounts.


High costs

Businesses that have a higher cost structure than their major competitors are likely to be at a competitive disadvantage creating the inability or failure to compete on price. 



Sales are growing faster than the business is able to generate cash flows to finance growth, with bank borrowing being inadequate. Margins are reduced due to price-cutting or increased material cost or products.


Poor working capital management

Working capital management involves the administration and supervision of debtors, stock, creditors and cash balance. This leads to the business being short on working capital and unable to fund growth. Working capital is used to fund debtors and stock.


Big projects

Business owners taking on big projects where costs are underestimated and income overestimated. Business owner’s under-quote on a project for fear of losing a job, or over-quote as they do not understand exactly how much the product costs. 

Reasons for money mistakes

Reasons For Money Mistakes In Small Businesses

According to business analyst and specialists, the main reasons for these fatal money mistakes comes down to a lack of financial knowledge, controls, planning and management.

That leads to making the wrong financial decisions that create a situation where our businesses run out of cash and fail. Every year thousands of companies go out of business because they violated one or more of the basic financial principles.

There is an old story of a man who decides to commit suicide by jumping off the 30-story building. As he plunges toward the ground, someone leans out of 15th story window and shouts, “ how is it going?” The Falling man shouts back “so far, so good!” Many people are running their business with this kind of Philosophy “so far, so good!” We are violating basic financial principles that apply to business success, sometimes knowingly and sometimes not. However, by violating them we may escape their consequences in the short term, but we will ultimately pay the full price later.

The truth is that you can, and must manage Money in your business purposefully if your business is going to reach its full potential. Success or failure, lays in our ability to make the correct financial decisions.

All the information we need to make the right decisions regarding our business can be found in your numbers. Without these numbers you will not be able to make accurate daily decisions.

Real Reason Behind Money Mistakes In Businesses 

We don’t have the privilege of having a CFO's (Chief Financial Officer) like in larger companies that have years of experience and outstanding finance skills that can look after financial goals, objectives, targets, budgets, risk assessments, and financial planning. So we have to do it our selves.

“If you don’t know your numbers them you don’t know your business.

- Marcus Lemonis, The Profit TV Show -

It is our job to find and know our numbers, to measure them and to manage them. This is one of the reasons so many small business get in trouble or fail. They simply do not know their numbers.

The Solution:

The trick is to figure out what the key success numbers are in your business and how they influence each other and the impact they have on your business profitability, cash flow and growth. The answer to most problems in business is numbers. The numbers will guide you and help you make the best daily decisions.


The problem is, you’re not going to get the numbers you need from your year-end financial statements or your accounting system. And unfortunately, this is about all the numbers the average business owner has. It’s also extremely difficult and almost entirely useless for decision-making because the minute you receive your year-end financial statements the information is at least 3 months old, outdated and limited. Making it impossible to identify problems on time, which is causing you to lose money that could have been prevented.

In most cases, we can only react to current situations, usually too late when the damage is already done. No wonder 50% of owners never even bother to look at the business year-end financial statements.

Traditional financial planning and measuring models will not help you in making better future financial decisions because they are looking backward rather than forward. We have been trained to look at our history to make future decisions. This may be good for tax purposes and outsiders like the banks and investors but is useless for helping the business owner making daily decisions. Success cannot be achieved by looking in the rear view mirror.

The Solution:

So you have to work out your own numbers. You can add a budget, targets, and projections, and you can see what was planned and how well you did. A big improvement and useful, but not sufficient. We all know most forecast is never accurate. The main reason is because if one element in your forecast change, everything change and you have to do it all over again. It’s very time-consuming, frustrating and sometimes challenging, and the reason most don’t do it - and why we get in trouble.

 We need a different solution.

The #1 Solution to Small Business Biggest Challenges

You need to have foresight business planning and management, so you can figure out what is coming, and do the right things Now, before the damage is done. To be able to identify risk positions and problems in advance and address any issues straight away, rather than being caught out by bigger problems down the line that you were not able to see with traditional planning and management methods.

Most businesses challenges and even failure are because they failed to anticipate what is coming.  Anticipation is the ultimate advantage in business and in life. Anticipation is to know the road ahead. If you know the road ahead, you have the ultimate advantage over every one else.

If you fail to anticipate what is coming, no matter how smart you are, you're going to end up "reacting" to the things (challenges) that is happening in your business. And if you start "reacting" in your business, your business will pay the ultimate price - death of the business.

In The #1 Solution to Small Business Biggest Challenges article we show you How, and Why you must know the road ahead.  Because if you know the road ahead, you can anticipate what is coming, and you can take action early to prevent something bad from happening in your business, or to take advantage of all the big business opportunities out there. But if you find your self "reacting" to circumstances in your business, I can guarantee you that you will eventually fail in business.

P. S: Stay focused, stay motivated, keep up the good work. Remember success is in front not behind you.

Talk soon.

About the Author Hans

Hans had 40 of his own businesses over the last 30 years and is famous for creating fast-growing businesses” He is an author, speaker, coach, and consultant and a specialist in business optimization and turnaround, helping smaller business owners eliminate business limitations, threats, and growth challenges in achieving their sales, profit, cash flow, and income goals with sniper precision.

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