Articles and News

New York, NY—When a seemingly successful small business closes its doors, the reasons why can vary from tragic (sudden death or illness) to a situation that could have been averted, such as making a series of small but avoidable money mistakes that add up over time.

A recent article in American Express’s Open Forum addresses 6 Common Money Mistakes Small Business Owners Make. Click the link to read the complete article, but to summarize, these include:

1. Mistakes in pricing strategies. Price too high (even in a luxury store) and you risk losing volume. Price too low and you risk profitability (and in a luxury store, possibly compromising your image.) This is where good marketing strategies differentiate a business. Read more from Open Forum about the 3 Most Common Small Business Pricing Mistakes. Hint: Lowest isn’t necessarily best, or even wise.
2. Incorrectly accounting for the full cost of goods or services provided, and not tracking gross profits. Every incremental cost—from shipping to shrinkage—needs to be factored in and gross profits should be tracked on an ongoing basis to quickly make adjustments as necessary.
3. Credit and collections. Many customers expect to buy on credit. At the B2C level, third-party providers are available to handle credit, but in a B2B situation, it’s often done in-house. The business owner needs to be vigilant before extending credit, set realistic credit limits and policies, and stick to them!
4. Keep an eye on your operational expenses. Make an annual budget for your overhead costs, load it into your accounting program, and track actual expenses against the budget every month.
5. Invest enough in your infrastructure. Don’t skimp on the resources (IT, accounting, bookkeeping, personnel) that you need to keep your business running effectively.
6. Keep abreast of tax issues to help you make good business decisions and avoid inadvertent and costly noncompliance.