The success of a business is largely dependent on how its finances are being managed and lack of funds when the business needs it the most can be very debilitating. It is important to plan well in advance that such a scenario does not arise in the first place and one should also seek the help of a financial expert if the needs arises.
Here are 7 cash management pitfalls that a business owner must avoid if he wishes to manage his business finances better:
- Not having separate accounts: It is imperative that you have separate accounts for your business and personal requirements. Most first time businessmen, who are starting their business with their own reserves, fail to make this differentiation and soon all calculations go haywire, with business funds being ended up used elsewhere and vice versa.
- Low working capital: There are some requirements and business needs that always have to be met and not having enough working capital during the slow seasons, can result in a downward spin for your business. Opt for a business loan to tide over this problem and pay back the loan as soon as the peak season hits and the sales are up again.
- Unnecessary expenditures: One must also keep an eye out for unnecessary expenditures and not waste money on extravagance just because the profits are up for the first time. Save enough for a rainy day when you have some extra cash and then spend on indulgences if your budget allows.
- Cash transactions: Most of the time businessmen tend to go for cash transactions and not cheques or demand draft for they wish to save taxes. That is a wholly erroneous idea because the cash money is very difficult to invest and it never grows just sitting in the cupboard. Always use bank transactions for your business and you will be able to diversify your funds without having to worry about any aspect of your investment or your IT returns.
- Depleting reserves: It is not a good idea to deplete one’s personal reserves for business at the slightest pretext. This creates a great pressure for the future and if your venture fails, you will be left with nothing to fund either your business or your personal emergencies. This is why one should apply for a business loan to tide over difficult periods.
- Lack of Upgrades: Choosing to work with old machines and not providing your workplace the upgrades it needs from time to time can result in the slowing down of your business while your rivals surge ahead of you. Whether it is hiring expert to train your workers in new modes of manufacturing or buying new equipments, get a loan at low business loan interest rates to fund your upgrades.
- Working relationship with banks: You should try to maintain a good working relationship with the bank at all times and they might be a bit more lenient when it comes to deciding your business loan eligibility. A good working relationship will stand you in good stead when you need additional financing and this will help you gain more confidence when you next approach the bank with your ideas of expansion.
SME and MSME loans from Bajaj Finserv are especially made to suit the needs of small business owners and they can avail a loan of Rs 30 lakhs in just about 24 hours. Only two documents are required to be submitted and if you are looking for business funding, then check your pre-approved offer here.