“In the business world, the rearview mirror is always clearer than the windshield”.

— Warren Buffett

Most business owners start with a great idea and lots of enthusiasm. Some people are so excited about their business idea and so eager to get started, they fail to recognize

Pat O'Sullivan

what is actually involved in operating a business. In other words, they fail to recognize the importance of planning.

As a business owner, you’re hardwired to enjoy a greater level of risk than the average person. But, if there’s one thing you don’t want to risk – especially in today’s economy – it’s your personal financial security, says Pat O’Sullivan, Strategic Change Mentor, Mentors.ie.

The common financial mistakes made by small business owners are:

Not Understanding the Collection Process and Cash Flow

Too many small business owners are so focused on making the sale and fail to recognize the importance of collections. For most entrepreneurs, making the sale and delivering the product or service is much more exciting then the mundane task of collections. In order to generate sales entrepreneurs extend credit to “high risk” customers. If you do not collect on your billings, you gave away your product or service for free. You will not stay in business too long if this occurs too frequently.

Ignoring Your Current Cash Position

Financial projections rarely work out as anticipated and therefore a cash reserve should be established. It is that cash reserve that sustains you when business does not run as smoothly as you anticipated. If you fail to appropriately manage your cash and your credit availability, you may find out that you ran out of money and credit just when you need it most.

Debtor Collection

Ensuring debtors pay punctually is crucial to the survival of a business. The outstanding debtors checklist need to be reviewed frequently and reminders sent to any account balances overdue.

Neglecting taxes

It really is crucial to make sure the organization is in conformity with all taxes to avoid Revenue interest and penalties. A business has specific tax obligations from the first day of trading not just when it becomes profitable. A sole trader needs to also budget for payment of income tax.

Not having a Board of Advisors

An advisory board should enable you to establish your priorities, objectivity and create accountability. One of the best ways to use members of your advisory board is to have them review your business plan and pre-qualify your major business decisions.

Although you can bring in friends or family members to fill these roles, it is crucial to have seasoned professionals that can provide honest and direct guidance. We recommend that you have a minimum of three advisors:

• A seasoned solicitor with the appropriate experience for your business
• A Business Consultant or Mentor with either finance or management expertise
• A qualified accountant – to set the business up and crunch the numbers throughout its progress

The very nature of a business owner is to constantly evaluate new ideas and business strategies. Without direction and accountability to control these ideas, you may be diverting too much attention away from achieving your primary goals. These common mistakes made by business owners if corrected can help their businesses grow by manifolds.

Schedule a Complimentary 2-Hour Business Review Session with Pat by clicking here.