Five Common Financial Mistakes In Business Administration


Doing a business project is not an easy task. Before embarking on the adventure of undertaking, it is convenient to have some basic knowledge about business management and administration clear.

You should know that undertaking is not a bed of roses and making mistakes, especially initially, is something familiar. But we must bear in mind that many of the errors that can make a business project fail are found within the financial sphere.

To help you develop your financial intelligence and bring your business to fruition, we have selected some of the most common financial mistakes in business administration. Take note!

Lack of Liquidity

Lack of liquidity is a problem that many SMEs and entrepreneurs face, and it is that having good start-up capital is not always easy. Although there are grants, subsidies, accelerators, or incubators, it is difficult to get enough funding to start strong in most cases.

To solve the liquidity problem, it is essential to anticipate and control the treasury. In addition, you should try to know the creditworthiness of your clients and be clear about the difference between your personal and business finances.

We Are Not Controlling Cash Flow.

Hand in hand with the previous point, another critical aspect in business administration is cash flow control. And is that to measure the capacity we have to face expenses, debts, investments, or unforeseen events, it is essential to know at all times how much cash the business has.

It is best to apply a series of strategies to ensure that more money comes in than it goes out. In this sense, collecting your bills as soon as possible and limiting your expenses will be essential. Remember that the only way for your project to survive is by generating liquidity.

Bad Planning

Designing a good business plan is critical when embarking on the adventure of entrepreneurship. It is essential to plan both the initial and the expenses in the short, medium and long terms. Of course, we must make this forecast with our feet on the ground, adjusting as much as possible to reality.

One of the primary axes that guide business administration is efficiency. Creating a financial plan that allows us to predict the company’s economic viability is a critical factor in dealing with unforeseen events and ensuring the success of the project.

High Fixed Costs

Having fixed costs that are too high is another of the most common financial mistakes. A problem that can put the financial planning and liquidity of the company at risk, especially when we do not achieve the expected income.

Nor can we forget that we must deduct costs and taxes from income. At this point, good tax management is essential, and the best way to keep complete control of taxes is to know the fiscal calendar. In this way, we will know when to declare taxes ( VAT, Personal Income Tax, Corporation Tax …).

They Are Not Investing In The Business. 

When we generate profits and make money, we risk forgetting about the business instead of continuing to bet on it and reinvest in the project. Keep in mind that a company needs constant investment. Otherwise, you will be limiting both the success of the business and its growth.

Also Read: When Do Business Systems Need To Be Supplemented With Planning Systems?

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