Managing the finances of your business can be a daunting and difficult task, the complexity of which we here at AGL truly understand.
Business owners often have to make financial decisions in the moment whilst considering the impact of that decision upon the future. Add a little pressure (from time constraints to vendors etc) to the process and this becomes a very challenging task. Without a money plan in place, it is incredibly common for individuals to make financial decisions which aren’t beneficial to the business.
We’ve selected three of the most common financial mistakes made by businesses to show you just how prevalent yet simple some of these mistakes are. All of which could be remedied by seeking financial guidance from professionals.
Picture the scene, things are going well, business is picking up and you’ve established that you have some extra budget left at the end of the period. Just as everyone does with a little bit of extra pocket money, you spend it on something nice.
BUT here’s the big problem, you didn’t have a financial plan in place to ensure that extra budget was actually extra. Then the unfortunate inevitable happens and you receive an unexpected – or should we say expected but forgotten about – bill. No matter how big or small the spending from the “not so extra” budget was, this bill means that your business has overspent and is, ultimately, out of pocket. With wages, more bills and expenses to be paid, this is not an ideal situation to find yourself in.
With a strong financial plan in place, misjudging budget is extremely easy to avoid and ensures you know your “not so extra” budget from your actual extra budget. A good financial plan takes into consideration a host of variables and possible scenarios, mitigating for unfortunate circumstances over the long-term. Changes are always going to happen but will you be ready to meet them when they do?
Hiring the Right People
Small businesses, particularly those which are just starting out often find themselves seeking to save costs wherever possible. Unfortunately, one of the most common areas companies cut back on is financial services- after all, it can’t be that hard to manage a budget, right? Not entirely. In fact, making this decision is where and why so many businesses go wrong; financial planning is not a walk in the park and requires careful consideration.
The difficulty that scrimping on professional financial advice poses is that, without the right person to guide you, it is easy to overspend or make the wrong money decisions. In the long run, this often means that an attempt to save money ends up costing you more.
Spending on Luxuries
Living a life of luxury is something many of us strive to achieve; we want the nicest cars, biggest houses or the most elegant of clothes. Unsurprisingly, this attitude doesn’t change within the workplace as we find ourselves needing the top of the range computers, desks, chairs… The list goes on.
The reality being that spending on luxuries is great, but only if you can afford it. Necessities should always be catered for over the luxuries.
Interestingly, the “can I really afford that?” question we carefully considered in day-to-day life is so commonly ignored within businesses, particularly with today’s options to lease equipment rather than buy it outright. While this can be a sensible option, without a strong financial plan in place to support the extra costs, businesses can wind up in a dangerous cycle of overspending due to unnecessary purchases on unaffordable items.
Very commonly, businesses – especially those who are experiencing a period of growth- are quick to implement costly benefits packages to fit with perceived industry standards. However, in the long run these can be hugely draining on your firm’s finances. There are other ways to reward staff in a real and valuable way, that don’t rely on your bottom line taking a massive hit. Our AGL Rewards Scheme for instance is a form of voluntary benefit scheme, which offers useful discounts at national retailers and health and wellbeing advice.
The simple truth is that many common money mistakes made by businesses are completely avoidable with the right help. Here at AGL that’s exactly what we strive to do. Whether you’re looking to drive profitability, increase cash flow or hire and retain the right staff, we can ensure that you do it in the most financially sound way for your enterprise. In conjunction with our professional partners, we are able to provide a truly holistic service. To learn more, get in touch.