Running a business is no easy affair. It takes a great deal of time, effort, money and skill to start one and all the more to maintain and build it up. One very crucial aspect to this comes in the form of finances. The financial side of the business is always one very tricky and sensitive matter to the point that it is fairly easy to commit mistakes. That said, here’s the list of common financial business crimes.
#1: Borrowing money when you don’t need it
Many entrepreneurs think that just because the bank is willing to lend, they are under obligation to take advantage of the opportunity. This mentality is under the idea that borrowing now when lenders are willing will be fine as they can simply set the cash aside for when they are needed. Wrong. Loans come with interests and these are expenses. If there is no need for it then by all means do not get one.
#2: Overdoing it with receivables
As much as possible, sales on credit should be avoided or at least minimized. Unless there is a valid reason for it and the entity has adequate skill and knowledge when it comes to their management, companies must do away to avoid the risks of bad debts, liquidity issues and collection headaches.
#3: Pricing goods and/or services too low
Many startups believe that low prices bring the money in. This could perhaps work but it does come with its consequences. For starters, this shall only be feasible for a short span of time. Low prices may mean inadequacy to meet costs and expenses in the long run. Costing should be regularly revisited to ensure that the entity is running on profits not losses.
#4: Overspending on unnecessary things
Many entities think that just because the bigger companies have it or their competitors do it mean that they should too. No two organizations are the same and what might work for one may not work for another. Do away with all the unnecessary and lavish expenses especially if they do not bring in value. Avoid the impulse.
#5: Over-hiring employees
The more isn’t exactly the merrier. Numbers do not necessarily equate to productivity. A qualified employee can do so much more than a team of under-qualified staff. Moreover, hiring way too much overhead will balloon up costs all while bringing in the same level of sales essentially lowering profits. Hire when only when you need to and make sure that they count.
Here’s our question for you. Have you committed any of these financial business crimes?