4 Bad Financial Habits You Need to Break in Your Small Business

  Let's face it.  We all have bad habits.  Whether it is biting your nails, interrupting other people, saying "you know" too much, posting your lunch on Facebook, etc.  You get the idea.

            Habits are basically cycles that are burned into our brains.  Something will trigger the habit and it sets off your instinctive action.  Ring a bell and we salivate.  At the end of the action is the reward, good or bad.  The reward keeps your habit in place. 

            The trick seems to be in replacing the bad habit with a good habit. 

My little family has tried some of these at home.  For example:

·         Replacing sugary cereal with oatmeal and honey.

·         Replacing TV with coloring and playing games (my coloring skills need work.)

·         Replacing staring mindlessly into my spacephone with actually listening to the world around me.

    The same holds true in your business, especially regarding the business financials.  Bad financial decisions, or indecisions, tend to wreak the most havoc. 

   

Below are four bad financial habits that may have crept into your business:

1.  Underpricing products and/or services - Unfortunately, many entrepreneurs believe they absolutely need to have the lowest price possible or they will lose their customers.  The truth is that people will pay for value, or at least perceived value, even in a down economy.  Don’t believe me?  How much TV do you watch in a day?  6 hours? No.  4 hours? No.  2 hours?  Maybe, but most of the folks I talk to will claim they really don’t watch TV at all; just the news and occasionally Modern Family.  Then why does almost everyone I know pay for some version of cable or satellite?  The same goes for having high car payments, drinking $4 lattes, and getting the new iPhone.  Raise your prices.  This will remove the bottom 5-10% of customers that take up too much time complaining and it will create new revenue dollars in your business.
2. Not saving for retirement – Most small business owners naturally assume their empire will be their retirement.  In fact, only a small percentage of businesses are ever successfully sold.  If your business would not survive without you, may not be not a sale in the future.  You may want to consider setting up an IRA, SEP IRA, or finding a rich uncle soon.
3. Not meeting with your accountant at least semi-annually – Small business owners are notoriously bad record keepers.  Not all, but most.  And several still use the Shoe Box Accounting Method.   One of the biggest fears that people have of using an accountant IS NOT that it will cost too much. It is that they don’t know what it will cost. Find a qualified accountant who can assist you and your decision making year-round, set a fixed amount that you will pay them, and use their advice.  They will almost always save you more money than they cost.
4. Ignoring your cash flow - One of the big issues facing small businesses is trying to figure out where your money is going. Many times you can show a profit on an income statement, but the cash flow (real money in, real money out) will be almost negative. Don't ever think you're too busy making sales and working in your business to worry about your cash flow.  Make sure you or a bookkeeper are entering all transactions into an accounting system and you are monitoring it.