The unpredictable repercussions of the pandemic are being felt around the world. Almost overnight, workforces had to switch to a remote setting and implement strategies to navigate operations in a global pandemic.
Whether you are a seasoned business owner or planning to start a venture, here are some money mistakes you should avoid, especially during a crisis.
Not Maintaining Financial Books
Even if you are running a small business, maintaining proper financial books is crucial for your organization. The smallest error can snowball into a financial blunder that can be detrimental to the future of your business. If you lack the expertise, it would be best to let a professional take care of bookkeeping.
Technology is your friend when it comes to maintaining financial records. So don’t shy away from adopting suitable software and tools to keep your financial records organized.
Making Financial Decision Out of Panic
It’s no exaggeration to say that the Coronavirus outbreak sent the world into a state of unrest. With lives and businesses in jeopardy, you may panic and take drastic measures that feel right at the moment.
However, financial decisions need time and careful consideration. Avoid making such decisions when you’re under stress or exhausted. It is advised to make important decisions pertaining to the future of your business when you’re well-rested.
Not Consulting a Financial Advisor
As a small business, you may not have the budget to have a full-time financial advisor. But that shouldn’t stop you from seeking the services of a financial expert. Before taking any major decision related to finances, you should consult an advisor to understand all the implications.
Inadequate Cash Reserves
Inadequate cash reserves have forced many companies to shut down. The bills won’t stop coming just because your business is unable to earn revenue. You need cash to pay vendors and keep up business operations. Every business should maintain a sufficient cash reserve to deal with unprecedented times.
Don’t Hang On to Debt
You may resort to depending on your credit card because of the lack of cash flow. While this can be a temporary solution, your business can’t sustain on borrowed funds for long. Running a business on loans and credit cards is a major mistake that can have devastating repercussions on your future.
It is best to find ways to generate more cash. Credit may be an option in some cases but make sure you are only borrowing what you can afford to repay. Otherwise, you may end up losing not only your business but also your personal savings.
Draining Personal Savings
From corporate CEOs to late-night talk show hosts, many bosses made the generous decision to pay their staff out of pocket. But it’s important to understand that these are millionaires and billionaires with excessive disposable income, and you may not be in a similar financial position. It’s not a good idea to fund your business with personal savings if it threatens your future financial security.
Not Finding Additional Sources of Income
Some industries like hospitality and entertainment were hit worse than others during the pandemic. While many had to close their doors, a few adopted creative ways to keep the income flowing. And that is what helped them survive the major crisis.
If your current product or service is suffering from dwindling demand, it’s time to think out of the box. For example, many restaurants that exclusively offered dining experiences introduced take-out options. On the other hand, singers and artists who could no longer hold concerts switched to virtual live shows.
Quickly adapting to the changing environment is key to survival.
Forgetting Tax Obligations
In the chaos of keeping your business afloat in a crisis, you cannot forget about your tax obligations. The last thing you want on your plate is dealing with tax fraud, the IRS aren’t always the easiest to deal with. It’s imperative to keep track of your federal and state tax obligations. Make sure you have qualified experts on board to take care of various tax liabilities.
It would be helpful to set up a separate saving account to save up for your upcoming tax requirements.
Some entrepreneurs are tempted to close doors at the first sign of trouble. But you need to look at the bigger picture. To survive the fiercely competitive business world, you have to take calculated risks.
And that can mean sticking around even if things are not looking good. Restructuring your business, leveraging technology, using LinkedIn automation tools, or introducing a new product or service are options worth exploring.
This is a scary time and even the smartest entrepreneurs are vulnerable to making poor financial decisions. Financial mistakes can be challenging, but it’s possible to recover with the help of the right strategies and expert guidance.
Also, make sure you have an experienced and talented team on your side. Hopefully, the tips mentioned above will help you make better financial decisions.