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 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.