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One of the most impactful things that a business owner can do early on in their entrepreneurship according to outsourced CFO is pay their business bills on time every month. This can be such a good practice that it can help a business owner be more successful in running their business. Therefore, the earlier a business owner can do this, the more impact they will have on their success as a whole.
Ultimately, business owners who pay all of their bills every month, will see if they start having a difficult time paying their bills, or if they are not making enough money to do that says outsourced CFO. The sooner business owner can realize that, the sooner they can make changes to their business to help increase the profit they have in their business. The answer might be for business owner to increase the prices of their products or services, so that they can end up increasing their profit margin. Or, perhaps it is about generating more revenue, either through increasing their advertising, or sales efforts. And finally, outsourced CFO says the answer may simply be in minimizing overhead. Whatever the answer is, a business owner who is paying their bills on time will be in a better position to know this earlier on in their business.
One mistake that business owners often make in their business, is thinking that if they are not financially viable as a smaller business, the answer is to grow their business and scale up. Their thought process is that they will have an easier time aching ends meet in their business if they are bigger. However, outsourced CFO cautions business owners against this thought process. Saying that whatever a business is doing as a smaller version, will continue doing is a larger version. Therefore, the less financially viable business is on a small scale, it will be as it scales up. Making it possible for business owner to simply lose more money on a larger scale instead of being more successful.
Business owners ultimately need to understand that when they pay their bills on time, can help them avoid unsustainable margins and overhead. How it does this is when business owners to make the payments, it forces them to face the reality of what that they can afford to pay for their staff or not. While many business owners are very anxious to get employees hired in their business, so that they can start scaling up their business. The reality of it is that a business owner must ensure that they have enough money in their business to be able to pay their staff. While it is okay for business owners to put in sweat equity into the business, that is not okay for staff members.
When entrepreneurs are able to focus on paying off bills in their business during the month, their business will be in a better position financially, and business owners will be able to understand if they need to focus on making their business more profitable, or selling more products and services. Doing this, business owners will be able to ensure that they can grow their business, and be more profitable.
Business owners who stop paying their business bills on time may believe that they are delaying the payments so that they can buy more time says outsourced CFO. In fact, businesses who do this, rarely do the activities needed to increase their revenue, which means that all they end up doing is avoid paying those bills, and let them pile up even more while they wait to get paid.
This can be very dangerous habit to get into, because the more that a business owner avoids paying their bills, the more those bills are going to pile up, eventually creating a scenario that can be very difficult for an entrepreneur to get out of. This can end up being a more difficult situation than brand-new entrepreneurs have been starting a business for the first time. In fact, outsourced CFO says that 29% of both failed businesses say they failed because they run out of money. This is one scenario of how it happens.
Another danger of not paying bills on a regular basis is when an entrepreneur tries to pay the bills that they have been avoiding for a while, they may avoid paying other things in order to have the funds. They may end up failing to pay their taxes on time, which will create an even worse situation for a business owner. Not only is Canada revenue agency very ruthless about collecting the taxes that are owed, by either freezing business owners bank account, or taking money directly out of their bank says outsourced CFO. Not only can this make it very difficult for an entrepreneur to run their business. But it can end up costing a business owner even more money.
How that happens, is because there are penalties associated with failing to pay taxes on time or properly says outsourced CFO. For example, if a business owner has not paid source deductions properly, not only will they be expected to pay the taxes immediately, but they will also be hit with a 20% daily interest penalty. Therefore, the longer that a business owner is not able to pay the source deductions back to Canada revenue agency, the higher the penalties going to be. This can end up being so high, that business owner is unable to recover from.
Business owners should ensure that they are getting into the habit of paying their bills on time every month early on in their business, so that they build all of the way habits that they need to have to ensure that they can always pay their bills on time. By learning what they need to do in their business to have the money, either through increasing margins, generating more revenue or credit costs can help a business owner be more flexible to be able to ensure that their business can generate the money needed to pay all their bills.
