Common mistakes when setting up in business

Financial planning is extremely important for most new businesses.

A lack of capital, lack of a contingency plan and reluctance to get professional advice can all bring major problems.

Lack of capital

Having sufficient capital is essential for the survival and prosperity of your business, and is a primary indicator of your business' health.

It is important to create a high-quality business plan to attract and secure the right type and amount of funding that you need to make your business successful.

A business plan can:

• be used as a tool to structure the financial side of your business and can be updated and changed as your business grows
• keep your expectations for what can be delivered grounded

For more information, see prepare a business plan.

Lack of a contingency plan

Without a contingency plan you can leave yourself exposed to the unexpected.

Situations beyond your control that may impact on your business and cashflow include:

• interest rate rises
• transport strikes
• political instability

While your business can survive periods where there are no sales or profits, it cannot survive without cash.

Building up cash reserves will make sure that you can trade effectively and develop your business.

A reluctance to get professional advice

Failing to get professional advice will make any financial troubles worse.

Few new business owners can claim expertise in all areas of their business.

Using an accountant or financial adviser can help you make sure that you borrow and manage money cost-effectively.