Most Businesses Fail Due to Money Mismanagement. These Quick Tips Can Help You Avoid Common Financial Mistakes. There are various reasons you should want to invest in money management skills for your business, and it all boils down to how profitable you want your business to be.

By Melissa Houston

Opinions expressed by Entrepreneur contributors are their own.

When you are the owner of your business, it's tough to manage all the tasks you need to excel at — sales, marketing, messaging and the list goes on. But the priority that needs to be right up there with sales is money management in your business.

Did you know that 82% of businesses fail due to money mismanagement? And most business owners fail at money management because of a lack of awareness.

As the leader of your business, you are the person in charge who makes the final decisions about your business. You need to ensure that you have a solid financial understanding of your business to make decisions that will impact your bottom line positively.

There are various reasons you should want to invest in money management skills for your business, and it all boils down to how profitable you want your business to be. Profit is the money (after taxes paid) that you, as a business owner, get to keep investing in the business or pay yourself as the business owner.

Profit is why money management skills are essential in business.

The best money management tips for your business:

Ensure your accounting system is in place

Your financial management system is the foundation that all your financial decisions will be based on, so ensure you have it set up properly and that the people you have hired to do the bookkeeping and accounting tasks are qualified.

Related: 4 Personal Finance Tips Every Entrepreneur Should Know

Read your financial reports

Don't just read your financial reports, you need to understand them as well. Money management decisions are based on the feedback of financial reports so be sure that you understand what you are reading.

Create a financial plan for your business

All businesses need goals to work toward and achieve, and those goals will be translated into money and profit margin goals. Money management is derived from the financial plan of the business to achieve its money goals.

Monitor your progress against your goals

When you set goals for your business you need to monitor your progress against those goals to understand what areas in the business you are excelling and the areas that need improvement.

Manage your cash

Cash management is an essential part of money management. Cash is the reason your business will stay alive. You need clients to pay their invoices and ensure you have cash balances to cover payroll and other financial obligations. Cash levels are always fluctuating and a key to business survival is good money management.

The bottom line is that money management skills are essential to business survival and need to be a priority in your business. Businesses that have the best ideas or service will not survive without good money management systems in place, so ensure that you make money management a priority in your business.

Wavy Line
Melissa Houston

Financial Strategist

Melissa Houston is a certified professional accountant, host of the She Means Profit podcast and blog (www.shemeansprofit.com), which helps successful business owners increase their profit margins so they keep more money in their pocket and increase their net worth.

Editor's Pick

She's Been Coding Since Age 7 and Presented Her Life-Saving App to Tim Cook Last Year. Now 17, She's on Track to Solve Even Bigger Problems.
Lock
I Helped Grow 4 Unicorns Over 10 Years That Generated $18 Billion in Online Revenues. Here's What I've Learned.
Lock
Want to Break Bad Habits and Supercharge Your Business? Use This Technique.
Lock
Don't Have Any Clients But Need Customer Testimonials? Follow These 3 Tricks To Boost Your Rep.
Why Are Some Wines More Expensive Than Others? A Top Winemaker Gives a Full-Bodied Explanation.

Related Topics

Business News

'All Hell Is Going to Break Loose': Barbara Corcoran Issues Warning About Real Estate Market, Interest Rates

The "Shark Tank" star appeared on FOX Business' "The Claman Countdown" this week.

Business Plans

How to Change Careers: A Step-by-Step Guide

Want to make a career change without compromising your finances or future? Check out this step-by-step guide on how to change careers to learn more.

Growing a Business

Subscribers Exclusive Event: Discover How These 2 Founders Turned Their Side Hustle into a Million-Dollar Lifestyle Brand

Learn how you can transform your personal brand into a thriving business empire with co-founders of The Skinny Confidential

Leadership

How do You Turn Employees Into Problem-Solvers? Follow This 3-Step Leadership Formula.

As leaders, we need to solve company problems effectively. We often have the urge to fix everything quickly, but is this system of problem-solving really sustainable?

Branding

How I Made Money From My Book Without Selling a Single Copy

Did you know you can make money with a book without selling copies? Here's exactly how I did it.

Leadership

The Real Reason Why The Return to Office Movement is Failing is Revealed in New Study

There is a vivid sign of the disconnect between employees and their workplace, a glaring indication that companies need to revise their scripts to improve their hybrid and remote work policies.