How do you determine if you have been making profit or loss? Who keeps a record of your sales and other expenditure?
Do you have a bookkeeper? Yes? How often do you hoard information from your bookkeeper? I realised a lot of business owners tend to hoard information from their bookkeeper.
Many business people alert their bookkeeper about incurred expenses after about a week or more. By then, most of the transaction information must have faded away from your mind because you have a lot practically going on in there. Then you give them partial information and expect them to figure out the rest. Right? This is very wrong. If everyone else doesn’t deserve to know, your bookkeeper must know. It is important you communicate
In the past decade, a lot of fashion businesses have sprung up – leveraging just a computer, smartphone, and the internet. This has increased the number of fashion entrepreneurs with almost 35%. This is one of the best gifts the internet brought to us; the ability to pick up an idea and build it into an amazing business using just a computer and internet.
Although this is a good development with many being able to build a source of wealth and livelihood with little or no cost at all, most of the businesses have, however, failed due to poor bookkeeping or accounting, even the existing ones are not left out.
It is okay if you can’t afford a bookkeeper but it is important that you, as a fashionpreneur, are armed with valuable bookkeeping knowledge which will help you build and run your business smoothly. It is no longer news that poor accounting or bookkeeping is ranked the 4th reason why a business will fail within its first five years. This is mostly as a result of you handling the accounting by yourself in order to save money. This is not the best idea.
You have to understand that a simple accounting error can cost your business greatly and have all your hard work washed down the drain.
Mistakes you must avoid:
Managing Everything On Your Own
I understand you are passionate about business, so you tend to do everything on your own. This is a frequent occurrence that shouldn’t be. I know you started off handling everything alone – from calling the shots, advertising, and bookkeeping. But this has to stop.
Managing accounts is very important and time-consuming. You would agree with me that you need all the time you can get to focus on building and growing your business. Therefore, you need to delegate or outsource your bookkeeping to professional bookkeepers/accountants.
Profit and Cashflow
Entrepreneurs often confuse Cashflow to Profit, you have to know the difference between these two in order to succeed. Your cash flow, in layman term, are those funds that come in and go out of your business as a result of running the business and other financial activities.
Your profit, on the other hand, is what remains after you have removed your expenses. You have to bear it in mind that even a profitable business can still go broke.
For instance, you bought a zip for N100, sold it for N200. This means you made a profit of N100. Right? However, what if the buyer is unable to pay the money on time or refuses to pay at all? You will find out you made a profit, yet can’t pay your bills. Learn to track your account receivables. It helps a lot.
Combining Business with Personal Finance
This is one easy way to mess up your business finances. It is advisable to open a business bank account before launching your business and thankfully now, commencing February 1st 2020, there will be zero CIT ( Companies Income Tax) charge on business with revenues of less than 25 million.
Make sure that all income and expenditures are transacted through your business account. Even when you still pay for expenditures out of your own pocket, please ensure that accurate records are kept. Keeping your personal and business records and accounts separate is very essential as it ensures a pain-free record keeping. Remember not to make the mistake of paying or receiving personal funds through your business account.
Poor Communication with your Book-keeper
Accountants are not magicians. There is no way we can know things when you don’t tell us. A lot of business owners tend to hoard information from their bookkeeper.
Many business people alert their bookkeeper about incurred expenses after about a week or more. By then, most of the transaction information must have faded away from your mind because you have a lot practically going on in there.
Then you give them partial information and expect them to figure out the rest. Right? This is very wrong. If everyone else doesn’t deserve to know, your bookkeeper must know. It is important you communicate!
For this particular reason, I created a simple tool that enables busy entrepreneurs and business owners make expenses and share the details with their bookkeeper on the go. This kind of expense tracking tool ensures speedy communication and reduces the stress of remembering each transaction afterwards.
The list of mistakes small business owners make in growing and scaling their businesses can’t be exhausted but getting these basic things in check will ensure a smooth and easy start for your business. It will help put your business in the right direction and boost your accounting structure in the long run.