5 Simple Mistakes in Managing Business Capital

5 Simple Mistakes in Managing Business Capital

When starting a business, there are many important things you need to pay attention to. One of them is your way of managing business capital. Of course, to be able to develop a business and survive among the market competition, proper capital management is needed.

This is because there are a number of decisions in capital management which, if left unchecked, can have fatal consequences. In some cases, this error is often considered commonplace and completely unexpected. The following is an overview of the mistakes in capital management that often occur.

Hiring too many people

The first mistake that is common in capital management is allocating funds to employ people who are not really needed.

When you feel the work increasing, it may be tempting to hire more people to help. However, it should only be done when the people in your business are already working at 100{d7fe11f3cc5025ed1dc653db11cfe8caa2528ab4ada6f4ef277ff0cef7ad45ff} efficiency.

For example, if you run a culinary business and have two employees. The first employee acts as a cashier and cleaner, while the second employee acts as a chef and waitress.

You need to consider a number of factors before hiring a new employee. Have both employees been working with 100{d7fe11f3cc5025ed1dc653db11cfe8caa2528ab4ada6f4ef277ff0cef7ad45ff} efficiency? Are there enough customers and funds for new equipment to promote work efficiency?

If you can still run a business with a minimal number of employees, it’s best to endure the hiring process. Unless you can create a clear breakthrough by adding to your employees.

Does not develop employee potential

If you have employees who are in accordance with the work culture in your business, you should think about the development of these employees. Of course, this is very relevant if your business is growing and becoming bigger.

By providing training access for these employees, you will not be bothered by the dynamic movement of the business.

Imagine if you owned a coffee shop and you saw an opportunity to sell coffee makers. In this case, you can entrust the employee who operates the coffee maker frequently and provide them with related training for this new task.

Because the employee understands the various components, performance, and workings of the coffee maker, he only needs to learn sales techniques to become a good sales agent. This can be a more cost-effective alternative to hiring a new sales agent. A relatively small capital to adapt to dynamic changes in the market.

Using company money for personal use

When your efforts pay off, the temptation to spend that advantage for personal gain is bound to arise. After all, what’s wrong with treating yourself? Isn’t this the right time to celebrate the results of your efforts?

You need to remember that a successful business also requires commitment from the owner. The profits from the business will be much more beneficial when used for development or at least securing a business position.

In this case, it’s a good idea to take into account how much of your personal expenses during the month. Of course, this figure must be realistic and within reasonable benchmarks. If you are already committed to the business, any income beyond that figure should be allocated to your business.

Do not have enough cash

One of the mistakes that often occurs with new ventures is underestimating company expenses and overly expecting business income.

Often there are operational expenses that are not considered in the planning stage. On the other hand, business income can be smaller than expected and even choked up.

Delayed payments from clients are not uncommon. If you accumulate client payments for operating cash, you can easily get into trouble. A good capital management tactic is to allocate a certain amount of capital for the company’s cash.

Does not do detailed bookkeeping

There are many reasons why an entrepreneur does not do business accounting. He may think that he has enough to look at his bank balance at the beginning of each month to determine success. He may think that looking at the history of bank transactions alone is enough.

If you are a group that does the company’s financial bookkeeping, are you sure you have carried out a complete bookkeeping process? Did you buy something for employee recreational needs, but didn’t record it because you used your personal money? Have you recorded every entry chronologically, both the billing date and the payment date from the client?

If you haven’t recorded your expenses and business income in detail, you should get started as soon as possible. There are many reasons for this, but fundamentally, accounting is the best benchmark for making corporate financial decisions.

There are quite a few mistakes in capital management. Fortunately, in general, these mistakes can be avoided by using business bookkeeping as a reference.

By looking at the company’s transaction history, you can determine which decisions are proven to result and which ones have high risk. You can also look for segments where you can cut expenses.

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