7 Business Money Mistakes

By Deb Purvis

Avoid making these costly financial mistakes in your business

Making financial mistakes in your business can be expensive and stressful, however we understand it sometimes happens. Keeping up to date with finance rule changes can be rather challenging. A good advisor, broker or accountant can help you with some of the big decisions you need to make. In this blog, we’re sharing some of the common financial mistakes we see rural business owners making, so you can avoid them.

  1. Spending without purpose

Just because you’ve got money coming in, doesn’t mean you need to spend it. You should have a plan when it comes to spending. What’s the best way to do that? Prepare an annual cash flow budget. Identify what your business priorities are and set up a plan for replacing machinery. Don’t make big purchases like land and machinery based on emotion. And while there will always be emergencies, building a contingency plan into your cash flow will stop you from being left short.


  1. Make debt reduction a priority

Having ‘surplus’ money feels good. It might tempt you to make the most of it and buy something you didn’t think you could afford.

Instead, make debt reduction a priority. Focus on chipping away at any debts with any surplus funds.

Of course, it’s also good to build up an emergency fund. But once you have some money tucked away, focus on paying down your debt and reducing the amount of interest you’re paying as quickly as possible.


  1. Deferred Terms for Input Costs

There are many businesses offering deferred terms for fertiliser and chemicals, allowing you to pay for your input costs after your crop is in.  Most will charge an interest rate higher than your overdraft interest to use their product.

Using credit wisely can be an important strategy. But the fact is, most of us aren’t as disciplined as we should be when it comes to using someone else’s money.

It’s also important to realise that any credit facilities you have will reduce the amount you can borrow. This is important if refinancing or if financing new borrowing is part of your financial strategy.

But there’s something even worse than deferred payments and credit cards. And that’s using other businesses for credit. Not paying suppliers within the agreed terms isn’t good business. In small towns, you’ll also find that word gets around pretty quickly about the businesses that don’t pay their bills.


  1. Does it have to be new?

We all like new things. The latest gadgets and newest models. Sometimes, investing in new technology is the right choice. But it needs to be part of a well-researched strategy. Don’t let shiny new toys tempt you into making a poor financial decision.

Machinery decisions should start with the maths. A good first step is to analyse the return on your investment. A negative return on investment could affect your overall profitability. Second-hand equipment or a contractor may make more sense.

“Assessing the return on assets will allow you to question, for example, whether it would be better to buy a cheaper piece of equipment or engage contractors, if they are reliable,” he said. “There are a lot of different questions you need to ask before spending the money.” 

Will Martel | NSW grain grower and former agribusiness consultant



  1. Mixing business and personal accounts

This is a common mistake, whether you’re a sole trader or a large company. Apart from being an accounting nightmare, it is harder to determine business profitability if you mix your business and personal spending and income together.

Talk to your bank about setting up specific bank accounts for your business. Decide how much you need to pay yourself and transfer and set up a direct debit to pay into your personal account each month.


  1. Not putting aside money for tax

There is nothing worse than getting to tax time and being stung with an enormous bill. Sure, there are options to set up a payment plan. But it’s still an added expense that you could have avoided.

When you set up your business accounts, consider setting up a separate tax account. Your accountant can help you identify a percentage you should put aside each month – or from each invoice – for any taxes you need to pay. If there’s some left at the end of the tax year, you’ve got a bonus. Or you can pay off a bit more debt.


  1. Not having a budget and a plan

Without a plan, you’ll be working without any real purpose. You need to set a plan and budget with specific goals and timelines.

Work out when you might need to buy property or machinery and plan to save your deposit or build equity.

A budget is telling your money where to go instead of wondering where it went.”

Dave Ramsey | Author – The Total Money Makeover


Time to create some good money habits

Whether you’ve confessed to one or all of these money mistakes, you’re not alone. Running a business is hard and there is a lot to think about, especially as the rules keep changing.

If you’d like some help to set up your business so you avoid these blunders, chatting to a knowledgeable agribusiness finance broker is a good start.

With their help, they can review your finances and help set some healthy money habits for your business.


Over to you

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