7 Most Common Money Mistakes for Startups to Avoid

Dealing with your finances head-on from the get-go is the best way to set yourself up for lasting success.

Careful planning can help you to avoid common money mistakes and shows potential investors that you’re serious.

Here are the most common financial mistakes that startups make and how to avoid them.

1. Prioritising Instinct Over Information

Whilst following your gut is generally a good principle, it’s a dangerous game to make assumptions about your finances. It’s vital that you meticulously track your revenue and expenses and closely monitor your cash flow.

If a small mistake goes unnoticed for too long, it could prove very damaging for your business. During the startup stage, using an Excel spreadsheet will suffice but be prepared to upgrade to bookkeeping software later on.

2. DIY Accounting

Managing your accounts by yourself will suffice for the initial setup of your business, but it’s wise to hire a professional accountant as early as possible. Juggling self-taught accounting with running a small business will eventually result in a backlog of errors, which can prove costly.

Professional accounting services save time, money and stress, allowing you to focus on growth. You don’t need to hire a whole team. Start by outsourcing your taxes or setting up quarterly meetings with a financial consultant for help and advice.

3. Failing to Assign Project

Budgets Assigning a budget to a project prevents it from draining your finances should something go wrong.

A clear budget will allow you to reassess your finances should the project require more money and make smart decisions that won’t damage your business.

4. Disorganized Files

The importance of balancing bank statements and keeping receipts in order cannot be overstated.

Patchy bookkeeping can cause chaos for your business and result in a lot of trouble, not to mention wasted man hours trying to resolve the problem. Keeping all of your receipts and cross-referencing your accounts with your bank statements is vitaL for transparency and future success.

5. Misunderstanding Your Target

Market In order for your business to be successful, you need to understand what your customers need. Knowing your target market helps you to reach them, as well as how to appropriately price your products and services. Here are some questions to consider:

? What is your market position?

? What need do you fulfil for your customers?

? How much value do your products or services provide?

? Who is your competition - and what makes you stand out?

Miscalculating prices can prove to be a grave error for a small business, but knowing your market well will help you to figure things out.

6. Hiring Quantity Over Quality

Over-hiring is an expensive mistake to make.

Hiring employees is one of the most costly parts of running a business, so going overboard is a huge waste of money.

It can also damage staff morale and productivity, and lay-offs further down the line will only amplify the problem. Bad hires are another threat to a small business.

Hiring the wrong employee can create an imbalance within the company culture. In turn, this can negatively impact other staff and even damage your business’ reputation.

Don’t rush the hiring process. Taking extra care to avoid mistakes can save a lot of trouble in the long run.

7. Miscalculating Expenses

In order to keep your business afloat, you need to know exactly how much cash your business burns each month.

Keeping a meticulous record of your expenses allows you to understand where your money is going, and how much you’ll need to survive.

Underestimating your cash burn can land your business in hot water, so create a projection of your monthly expenditure and be sure to monitor it closely, making adjustments whenever necessary.

A successful business needs a strong financial foundation, so keep these mistakes in mind. No business is invincible and it really does pay to be cautious and always stay one step ahead.

PTS Advisory accountants helps clients in?Glen Waverley ,?Wheelers Hill , surrounding suburbs and all across Melbourne fulfilling their taxation, bookkeeping and financial needs in order to grow their businesses and personal wealth. We can do this by providing them with meaningful, timely and accurate financial information regarding their business and personal affairs. This is one way to enable clients to make the best decisions possible when it comes to business planning, investing and other big financial decisions.

We also of course help business clients with their compliance needs, such as tax preparation, payroll, bookkeeping, lodging BAS payments, superannuation and more. When it comes to tax returns, we are there to help our clients pay legally less tax.

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Select most relevant to your circumstances to find out more about how we can help you achieve your financial goals.

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