Financial freedom is synonymous with business health, but the path to achieving it is sometimes full of tortuous debts and sterile negotiations …
Not controlling finances can trigger a long list of unpayable debts that compromise the future, growth and well-being of your business. We will review the most common financial mistakes that end up putting almost all entrepreneurs in trouble.
A list of credits that has no end
Credits are very useful to equip your office and to get all the stock you need to start, but this tool can be abused very easily, to the point of ending up pawning your income.
Review all the products and services that you have paid on credit in the last year and ask yourself if they are essential for the operation of your business and, most importantly, if you can really take on all those commitments without going bankrupt. In most cases, the essentials do not exceed 20% of total expenses. Remember, that something is useful does not mean that it is necessary.
Excess frivolous spending
Another bad habit that puts many in a tough financial situation is frivolous spending. There is nothing wrong with incentivizing your employees and collaborators with an annual dinner, but if you tend to spend large sums of money on things that will not have a direct impact on your billing, your financial problems will not stop growing.
Think that, if you save all that money that you normally spend on unnecessary things, you can invest it in marketing campaigns to increase the customer base or in new products to offer to your regular customers.
Buying a company vehicle
Hundreds of thousands of business vehicles are sold on credit annually. This, at first glance, is a symptom of the general inability of buyers to buy a car in cash, and of the bad financial practices of most entrepreneurs.
When a company enjoys financial freedom, it has the ability to buy a new vehicle for cash that meets its needs. If there is no financial freedom, one must consider whether the car is the only means of transport available to perform tasks, or, as in many cases, is it an expendable comfort or an outdated attempt to make a brand image.
The endless fees to pay a loan for the purchase of a vehicle often put a hole in the finances of many companies, and are almost always expenses that can be avoided.
Subsistence loans are much more than a financial mistake, they are a clear indication that things have come too far.
A clear symptom of being subsisting on loans is buying stock material using a credit card. If you have reached this point where you need to use your credit card to pay the suppliers that supply the product that you sell to your customers, you must stop the activity as soon as possible.
Not only are you paying for those much more expensive items, taking into account the interest rates you must pay to the bank, but you are choking the business. You need to re-create a viable business plan and look for investors to relaunch the project.