5 Mistakes to Avoid While Managing Your Small Business

A small business has its share of challenges and rewards. It’s been noted that, in some cases, entrepreneurs can be great at starting a business but not so great at managing it day to day. However, this is not predestined to come true, especially if you avoid the big problems that most small businesses face. In that spirit, we present five very common mistakes that trip up small business owners. If one or more of these apply to your situation, take steps to rectify, or better yet, avoid, the problem. You never receive a guarantee of success in business (or anywhere else, for that matter), but addressing these hot spots will help put the odds more in your favor.

Inadequate Planning: You can sidestep a lot of anguish by assembling a business plan and a budget forecast for the initial year of operation, and updating it periodically. A business plan tells investors, vendors and potential customers that you have given serious thought to your business, including, marketing, finances, selling, operational procedures and organizational policies. A budget demonstrates your comfort at forecasting numbers and making reasonable assumptions. Make sure you address the important issues regarding taxes, buying inventory, compensation, and interest payments, to name a few.

Improper Accounting Procedures: You can’t keep books at whim — you must attend to them daily, even if it seems inconvenient. Not keeping your books accurate and up to date invites unpleasant surprises or worse. Without correct information, these surprises can affect your business profoundly. Improper accounting procedures can result in unpaid debts, uncollected income, shortages of cash and even bankruptcy. If accounting is not your cup of tea, either by temperament or by ability, then for heaven’s sake engage a bookkeeper or accounting service to maintain your books properly. The service will pay for itself many times over, and, of course, it’s tax-deductible!

Poor Internal Controls: Having a bookkeeper is necessary, but not sufficient, for keeping your business running smoothly. You also need to install internal controls that prevent employees from embezzling or hiding mistakes. You or one of your trusted partners must frequently review important primary financial documents, such as purchase orders, invoices, cancelled checks, bank statements and receipts, and ensure the information matches that in your books. Be especially careful about who can sign checks and amounts that require a second signature. Even if you use an outside vendor to keep and/or audit your books, remain personally involved in overseeing internal controls and don’t be afraid to tweak them as necessary.

Failure to Delegate: Let’s face it: Some entrepreneurs are, frankly, megalomaniacs. They feel it’s impossible to delegate even the tiniest task, forever micro-managing each employee and generally creating a nightmare for the staff. Sooner or later, your business will suffer, your employees will revolt and things will start falling between the cracks because you’re spread so thin. Get a grip! Abandon this self-defeating behavior by respectfully communicating with and delegating to your staff. Meet frequently with your employees, receive periodic updates (but, please, not nine times a day), and create procedures that allow you to evaluate whether the business is operating well. One last thought — don’t go too far in the other direction and lose control of your business!

Not Planning for Contingencies: Even if you do everything right, businesses (and life) are unpredictable and important matters are often out of your control. For example, you might sell a product that has just been recalled by the FDA, or supply a service which has suddenly lost its appeal. You need to plan for all sorts of contingencies and figure out what resources you’ll need in order to respond optimally. Sometimes, this means you’ll need to secure credit quickly, so make sure you have in your virtual Rolodex the name of a lender that can respond to a loan request in a couple of days, like, for instance, IOU Financial.