If you are running a small business, you know how challenging the financial element can be.
Fortunately, Sage has years of experience working with small businesses and has identified common mistakes that small businesses make when expanding their operations.
These common mistakes detailed below can help you avoid repeating them.
Small business owners start with a limited number of skills, and many resort to outsourcing certain tasks.
However, it is far more effective to upskill yourself and learn how to do them – because those to whom you outsource will charge you a premium for these services.
They initially outsourced large orders, but after realising the expense of this, they brought everything in-house and upskilled themselves to get the work done – saving themselves a lot of money.
Not investing in yourself
Many expanding businesses are too scared to invest in themselves, as they think they must prioritise immediate costs and expenses.
If you invest in yourself and your business in the right areas, you will equip yourself with skills that provide significant benefits.
This is a core belief of entrepreneur Mashudu Modau, a youth entrepreneurship advocate who has worked with many young Africans.
He explains there are many fixed expenses that you can budget for, such as salaries, resources, and rent.
However, other variable expenses are essential to track as these expenses are the ones that can spiral out of control if not monitored.
This is particularly true when your business is expanding.
“Drawing up a budget means you will also be able to plan and save for your quieter months, as well as identify expenses you could eliminate,” said Harduth.
Not having an ‘ICE’ fund
Harduth further highlights the importance of an “in case of emergency” (ICE) fund, consisting of at least three months’ worth of expenses.
This money should be readily available, yet should be invested in an account that earns good interest.
You should only access this money if you encounter an emergency situation. Do not be tempted to dip into it for day-to-day expenses while you are expanding.
Sage can help
Sage offers products and solutions designed specifically for small businesses, including financial, payroll, and payments software – all of which simplify your small business’s financial processes during its growth.