4 Small Micro Medium Enterprises Financial Management Mistakes to Avoid
In 2016, Wasp Barcode Technologies asked more than 1,100 small business owners what their biggest challenges were when running a business.
The result is predictable, financial management issues top the list.
As many as 43% of them said that it is very difficult to increase their income or turnover. As many as 45% said it was difficult to increase profits. Meanwhile, 36% have difficulty managing cash flow management. Sound familiar?
That’s why you need to learn about 4 financial management mistakes that small business owners often make, as well as some advice on how to solve them.
1. Spending Too Much Money Quickly
“You need to spend money to make money.” That’s right, you need to invest in your business. However, investing too much too fast is often cited as one of the main causes of business failure.
In the early years, when a business still has fragile foundations, it is more important to focus on getting as many new customers as possible, and proving that your business model is working optimally.
Solution: reduce investment that is not so important, for example investing in equipment and equipment that is too expensive and less needed. Find other alternatives that are cheaper or even free and have similar functionality.
2. Projected Future Sales Too Big
Optimism is needed in projecting future sales, but don’t overdo it. Conservative thinking is needed to determine reasonable growth and profitability.
To make big sales means that you also have to get a lot of customers, and you have to be realistic in determining the number of customers in the future.
Solution: calculate how much it will cost to get one customer. The formula is simple: the money spent generating leads divided by the sales made.
For example, if the company takes out $ 5 million in one year and generates 100 leads, then the cost per customer acquisition is $ 50 thousand. From this calculation, you will be able to make projections that are clearer, more measurable, and of course realistic.
3. Not Analyzing Prices
Every business owner has found it difficult to price their product or service. There is a special art and knowledge to pricing a product. This means you cannot rely on intuition or determine it at random. Too expensive will make your customers think twice about buying, while if it’s too cheap you will find it difficult to make a profit.
The solution: learn how other people in your market are pricing their products, so you can set a price that remains competitive. Race to the lowest price is not a good idea. Look for other ways to separate yourself from the competition, for example by finding a balance between price, value, and user experience that makes you the best choice for your customers.
4. Mixing Personal and Business Finances
While it may not seem like a big deal, mixing business and personal finances will make it difficult for you to manage and track them. Things that should be optimized may be difficult to detect, for example knowing exactly how much household costs, business costs that can be saved, and the income generated by the company.
Solution: the solution is clear, you must have separate bank accounts for business and personal. Segregated accounts have many benefits, such as the flexibility to link multiple payment services, and a simpler bookkeeping process.
This is the discussion regarding 4 financial management mistakes of Small Micro Medium Enterprises that must be avoided. For your business to grow, don’t forget to advertise through the Froggy Ads service, you can start by advertising your products so that later you can increase visitors on your online business portal. Froggy Ads is an online advertising service that can help you control all your product campaigns. helps you target your desired marketing target and gives you many options to market your product.