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3 financial management mistakes that can kill your business

3 financial management mistakes that can kill your business

Doing financial management correctly can sometimes be a little challenging. Many business owners complain that they close almost every month in the red, even selling a lot. Why does it happen? Does it have an explanation? Yes, of course. In fact, in many cases, these entrepreneurs are making classic financial management mistakes, yet they don't realize it. The big problem is to let these slips go without a solution. And, this is extremely dangerous and can even cause the company to go bankrupt. That's certainly not what you want, right? 

Then see below, some of the common financial management mistakes that can compromise your business. Find out if you are making one of these mistakes and learn how to avoid them.

Mixing business and personal accounts 

Not separating personal and business accounts are undoubtedly one of the worst financial management mistakes an entrepreneur can make. When this happens, it is common to lose control of finances and cause numerous problems to arise. The main reflection of this practice can be seen in the company's cash flow. After all, when the manager withdraws money in an uncontrolled way, it makes the business not have enough resources to bear its costs. 

At this time, it is common for the entrepreneur to encounter arrears, high-interest payments, and the need to apply for bank loans. What could be a viable solution, if there were efficient financial management? The situation may become more worrying when the manager needs to sell his assets to pay for company expenses. This attitude is extremely risky, as he will hardly have the return on the investment made. Thus, it is essential to define a fixed monthly salary for the entrepreneur, as it avoids excessive withdrawals from the company's cash.

Not having a cash flow 

Cash flow is an essential tool for controlling every penny that enters and exits the business. And, it also generates some basic information, such as main expenses, monthly income, and available value. Besides, a more detailed cash flow also provides some strategic data regarding the payment history of customers and suppliers. 

All of this makes it possible for the manager to have a reliable and fixed base for making decisions and making future projections. It is very easy nowadays to avoid any problem by creating a cash flow. There are many apps and financial management tools that facilitate this process.

Lack of control of accounts payable and receivable 

Another common financial management mistake is not to control the accounts payable and receivable. The main reason for this is that when you delay the payment of duplicates, you will have to bear high-interest rates and fines that can wipe out your profits. Besides, your company will likely have a negative track record in the market. In the long run, it will be extremely difficult for you to get credit to buy merchandise with good conditions to pay. 

On the other hand, when you have no control over accounts receivable, you will have to deal with debt and loss of profitability. Also, there is the fact that the entrepreneur will not have a solid database to collect debtors. The ideal solution for this type of problem is simple. All you need to do is adopt a financial management tool that has the functionality of accounts receivable and payable.


Now that you have discovered, what are the biggest financial management mistakes?  The chances of your business closing can go down considerably. To do this, you must be careful not to make these classic Financial Control mistakes and invest your time in the development of your company.