Common causes of financial mismanagement and how to avoid them

There are a lot of reasons why businesses fail, almost all of which has something to do with finance. Given that cash flow is the bloodline of every business, mismanaging funds can eventually lead to a company going under. It’s difficult to see these problems especially for first-time business owners and those who don’t have a background in finance. According to finance expert Michael Giuffrida, knowing the causes of financial mismanagement can help business owners avert disasters. Here are some of the most common causes of financial mismanagement and how to avoid them.

Bad spending habits: Business owners often dip into the company’s finance to make small purchases like a Starbucks coffee here and a fancy lunch over there. However, they fail to see that they are slowly eating away at possible monthly revenues instead of using funds generated by the company. Business owners should actively critique their spending habits and find new ways to cut costs.

Too much stock: While purchasing in bulk can have its merit, having too much can have adverse effects on finances. According to Michael Giuffrida, stocks that don’t move for a long time are liabilities that don’t pay rent. They take up a lot of space, are at risk of being damaged, and they remain primarily as costs until they are sold or used. Find the proper balance of stocks and have just enough backup for emergencies.

Taxes: Another pitfall for businesses is paying too much taxes. This can be inherent depending on how the business was structured. If you feel like your business is paying too much taxes, seek the help of a legal professional to know your options.

Michael Giuffrida is a managing partner at Titan Strategic Partners. With headquarters in Hartford, Connecticut, the company’s expertise is in building and improving organizations from startups to established businesses. For more insightful reads on business finance, visit this page.