Be Money Smart: What Not to Do When You Own a Business

Taking control of your money and being responsible with your spending and saving habits is an important part of financial literacy. It applies not only to personal expenses, but to business expenses as well.

It’s crucial for business owners to be organized with their finances, plan ahead with investments and avoid unnecessary spending. To conclude Financial Literacy Month, we’re introducing a few key mistakes business owners tend to make, and offering some suggestions on how to avoid making these missteps.

Don’t Spend Money Without a Budget

Many of the money saving principles used for personal budgeting can also be applied to creating a business budget. With a proper budget you should be able form saving habits, plan ahead, and determine how much money will be invested back into your business each month. It’s s also very important to keep track of business-related receipts to maximize your tax returns at the end of the year.

One key thing to watch over is travel expenses. Gas, plane tickets, hotels and food can be very costly if you do not create (and stick to) a budget for them.

Don’t Hire Too Quickly

Hiring the right fit for the organization is a difficult task, and one of the dangers in recruitment is the tendency to to make snap decisions when hiring.

Quite often, organizations do not have the time or resources to conduct extensive assessments to find out whether a candidate is suitable for the job. What many companies don’t realize, however, is that hiring the wrong person can bring a bigger financial and productivity loss to them than taking the time to ensure they are selecting the best candidate.

Employers shouldn’t be relying solely on interviews as an assessment tool – it’s better to complement the interviews with simulations, case studies, reference checks and other practices. For example, a person applying for a position that requires technical skills should be required to complete a technical assignment, since the interview alone is often not sufficient in assessing their competency with these skills.

Don’t Go Wild during the Holiday Season

Discounted goods and services are a common practice during the holiday season. They help to attract more customers and generate sales. However, businesses should be careful with offering big discounts, since it is easy to end up losing out financially when doing so. This is especially dangerous for smaller businesses that have a smaller client base. Lower prices help small business to stay competitive in the business, but if they’re low, employee expenses can quickly overwhelm profit margins.

The key is to find a balance that will attract customers and ensure that the business stays profitable. If you’re using holiday discounts, you should also remember that there may be a promotional cost associated with advertising. It’s important to budget for these promotions, so that you don’t end up losing money during the sale. For example, distributing discounted materials such as coupons to valued customers who support your business is a much more effective practice than blindly reaching out to anyone.

Don’t Advertise without Doing Research First

Advertising is necessary to ensure that people are aware of your organization or company and what it stands for. But despite its usefulness, advertising can be also be costly and quite ineffective if you don’t know how to use it. For example, pay per click advertising, even though it seems like a good option to reach out to people, may be a waste of money if you don’t know how to run an effective campaign. It’s important to do your research and to utilize the resources available online to ensure you have a successful advertising campaign.