Horizon Community Bank Celebrates Global Entrepreneurship Week (Nov. 14-20, 2016)
LAKE HAVASU CITY, Ariz.—Nov 15, 2016— Successful entrepreneurs share something in common: they can translate an idea they are passionate about into a business that generates revenue. They can turn inspiration into sales, customers and growth, and transform a little success into a lot. It’s not luck or coincidence that makes them successful; it’s the ability to manage resources – everything from decoding which great idea is backed by strongest market demand to massaging the tiniest trickle of revenue into a robust, consistent stream.
They also learn from others’ mistakes.
In recognition of Global Entrepreneurship Week (Nov.14-20), Horizon Community Bank would like to share a few of the most common mistakes entrepreneurs make while managing one of the most important resources a small business can have: money. These mistakes can turn a potentially successful business into a financial nightmare.
1. Allowing personal and business finances to be combined. It’s very important to keep business checking accounts and credit cards completely separate from household and personal accounts. If they are mingled, it’s much more difficult to maintain the level of detailed financial records (and receipts!) that a business requires. It also makes it much more difficult to track profit and loss, or maintain a budget.
A clean separation between business and personal banking is especially helpful for tax purposes, too. Depending on the type of business, it might simplify money management even further to have one checking account for revenue and tax payments, and another for payroll.
2. Failing to maintain a profit and loss statement. Just because a business generates revenue doesn’t mean it’s profitable. Keeping a close eye on income versus expenses can be surprisingly eye-opening. A profit and loss statement helps you understand exactly how much money you are making after all expenses are paid and what your profit margins are. Remember that 80/20 rule that identifies only a small percentage of your customers are the most profitable? This important financial document can identify profitable customers from unprofitable ones, so you can act accordingly. It can also help you forecast revenue more effectively by revealing important cash flow patterns and assets.
A budget is another key financial document often overlooked. We highly recommend it! And if you’re feeling energized by these ideas, a third financial form worth consideration is a customer acquisition cost analysis. It’s extremely useful to understand exactly how much you are spending to bring in each new customer or sale, and what that customer’s lifetime value is approximately worth. It can form the basis of a very effective marketing budget!
3. Lack of monitoring delegated accounting. We all have things we don’t enjoy doing and, for some entrepreneurs, accounting and finance can easily fall on the side of “least enjoyable.” It’s easy to delegate or outsource, then become immersed in what we DO enjoy – the reason we went into business in the first place. One of the hardest things about being a business owner is wearing so many hats. It’s perfectly fine to delegate financials, but that isn’t a free pass to ignore what they are doing. It’s up to the business owner to keep an eagle eye on the books at all times, and verify the work being done. After all, it’s their business and their responsibility.
4. Inability to cover financial shortfalls. Change happens, and shifts in product sales, unexpected emergencies, a new contract with expensive inventory needs, or the loss of a major customer can lead to disaster for a small business. Business owners realize that if we can count on anything, it’s that either revenue or expenses will suddenly shift when least expected. Those who haven’t planned ahead for a rainy day can quickly find themselves in serious trouble. Whether it’s a payroll shortfall or to take advantage of an unexpected opportunity, it’s essential to have financial means to protect your business. This might mean a savings account, a line-of-credit, a credit card with an open balance, a short-term loan, or all of these things – but having mechanisms in place and thought out in advance to handle unexpected shortfalls (or windfalls!) are critical. Without this, a business is vulnerable to change.
Financial skills are an essential part of the “success formula” entrepreneurs need to sustain and grow their business. Every successful entrepreneur needs an ability to make money, manage it successfully and borrow more when needed. Taking time to learn key tasks and avoid common mistakes like these can be a very smart move.
Horizon Community Bank is a locally owned and operated FDIC insured bank with branches in Fort Mohave, Lake Havasu City, Mesa, Parker and Quartzsite. It has almost 80 employees and provides high-touch, customized financial services to those in the healthcare, transportation, real estate, and technology industries, as well as general commercial and consumer services. Horizon Community Bank is a subsidiary of holding company Horizon Bancorp, Inc.
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This press release may contain forward-looking statements, estimates or predictions deemed “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to factors such as market, regulatory, economic and other conditions, and may involve risks, assumptions and uncertainties that impact actual results. Undue reliance should not be placed on any forward-looking statements. Horizon Community Bank does not have any intention or obligation to update forward-looking statements, except as required by law.