Owners of small- and medium-sized enterprises (SMEs) are largely an optimistic lot. Unfortunately, this optimism often gets in the way of good business sense.
All too often, we see small business owners choose a seemingly easy path to managing their finances that often costs them more than they imagined in the end. Here are some of the more common mistakes that even experienced business owners make (and that you should avoid as a small business owner yourself):
1) Not Setting Up a Separate Business Banking Account
While using a personal account is probably not such a big deal if you’re just starting your business, you’ll want to open a small business banking account as soon as possible to simplify your auditing and to insulate your personal finances from business liabilities. Opening an online business banking account also gives you access to specialized financial products that could help your startup grow faster.
Maya Business Deposit is a special savings product that offers the kind of business banking Philippines’ startups and SMEs need. With no maintaining balance and a 2.5% per annum interest rate, you can grow your business’s funds while you save. You’ll also enjoy free transfers via PesoNet and InstaPay, keeping your operating costs low.
2) Treating an SME’s Bank Account Like a Personal Account
On a related note, once you’ve opened your business’s bank account, you should never dip into it for anything but legitimate business needs. Treating your SME business banking account like it’s your own can hinder your business’s ability to build its credit history, attract investors, and maintain financial stability. Even worse, it may even leave you open to legal risks, particularly if there are multiple business founders or equity owners involved.
3) Not Reinvesting Earnings into the Business
When you’re deep into managing your business, it can be easy to justify putting more of its earnings into day-to-day operations. However, failing to set aside some earnings into further developing the business can lead to stagnation and a loss of your competitive edge. Always try to allocate some earnings into areas that will help your business develop and keep pace with the times.
4) Making Excessive Cuts to Marketing Budgets
Many small business founders fail to recognize the value of marketing. As a result, it’s an area that’s often skimped on to save money.
However, not allocating anything for marketing or making cuts to your marketing budget early on can hamper your success by increasing the real cost of acquiring customers and facilitating sales. While you don’t always have to go all out in your marketing, make sure you allocate enough resources to allow your business the opportunity to flourish.
5) Not Optimizing Recurring Charges
For small business owners who are not careful, recurring charges like supplier payments and subscriptions can bleed their businesses dry. If you have apps for business banking online, you should be able to look at your regular transactions and spot subscriptions that could be stopped as well as payments that could be scheduled at a better time.
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6) Spending Too Much Too Early
New business owners often make the mistake of going all-out, especially when they’re presented with a large initial operating capital. They might overhire or buy assets like real estate or machinery when it might be more practical to rent in the meantime, for example.
Spending big early on is often a gamble, as it can deplete funds that might be better used for operations. Moreover, it can take time for a new business to generate steady revenue, and large initial expenditures can put unnecessary pressure on the company's financial health. Evaluating these investments thoroughly is key to preventing such expenses from becoming a burden on your finances.
7) Underestimating Needed Working Capital
Overly optimistic estimates about how much profit a venture or a project will generate can result in a shortfall in available working capital, potentially leading to the failure of the business. Doing better market research and taking precautions should help ensure that the lights are kept on and your employees are paid on time.
8) Maintaining Too Much Inventory
Many business owners in the retail sector think that by offering everything under the sun, they can somehow attract more customers than their competition. While this makes sense in theory, in most cases, excess inventory just ties up capital and slowly drains your finances through holding and warehousing costs.
Having too much stuff on hand can also bring down your profit margins and, as a result, your competitive edge. For most businesses, maintaining a strategic focus and implementing efficient inventory management is a better path to financial stability.
9) Over-Relying on Credit
While credit can provide short-term relief and support business expansion, excessive reliance on it can have negative consequences. Striking a balance between credit usage and sustainable financial practices is essential to ensure your business's long-term viability and success.
Make Better Choices for Your Small Business with Maya Business
While there are many ways to run your business, there’s only one business savings product that ticks all the boxes for Philippine-based startups and SMEs. With its 2.5% per annum interest rate, free transfers via PesoNet and InstaPay, and zero maintaining balance, Maya Business Deposit is the best savings solution for small businesses. Create a Maya Business account to enjoy more stable growth and finances with your own Maya Business Deposit account.
A Maya Business account offers you more than small business banking online. It also lets you sign up for exclusive bundles like Maya 1-2-3 Grow. The Maya 1-2-3 Grow bundle ramps up your small business’s growth by giving you an extra PHP 14,600 in transaction fee savings for every PHP 1 million in QR Ph sales for 3 months at a 1% merchant discount rate (MDR). You can also enjoy a generous 2.5 p.a. interest on your Maya Business Deposit account when you open one to make it your settlement account. This exclusive bundle also qualifies you for a no-collateral Maya Flexi Loan offer of up to PHP 2 million just 3 months after signing, giving you extra funds to expand or cover emergencies. Sign up for Maya Business today to enjoy better online banking with Maya Business Deposit and to unlock the Maya Business 1-2-3 Grow bundle, empowering you to make smarter choices for your business.
