There are, sadly, many bad habits when it comes to money matters. What these habits all have in common is the results they deliver: cash needlessly wasted and opportunities needlessly squandered.
Even if the effects aren’t catastrophic, their perpetuation forces you to work longer and harder just to receive the same financial results.
These five habits in particular tend to dominate in the business world.
1. Analysis paralysis
Remember a time where nothing happened because you were so focused on trying to determine which option was best? That is analysis paralysis.
Nowhere is it more visible than in an election year. Business leaders sit on their hands in the weeks and months before a federal election, waiting to see what (if any) policies are unveiled that could impact their operations during – positively or negatively.
Delaying a decision to wait for a change that may or may not come is a risk in its own right.
Delaying a decision to wait for a change that may or may not come is a risk in its own right. Sure, you could save a few dollars should you receive a tax cut or grant change, for example. But at what cost in the meantime?
Ultimately, the right decision is the one that is best at the time with the information at hand.
2. Tunnel vision
Surprisingly few business leaders are as diligent with their personal finances as they are with those of their business. While obsessing over profit and compliance, cost control and margin management, their own financial health takes a beating.
Owner–operators too often merge the two, creating endless headaches deciphering personal from business expenses at tax time, and risking penalties for getting it wrong.
Many practices you use to manage business finances can be easily replicated personally: weeding out unnecessary spending; diligence over incoming monies; on-time payments to avoid interest and late fees; plans to manage interest rates, currency movements, cash flow constraints, and so on.
If nothing else, less financial stress at home leaves your mind clearer for better decision-making at work.
3. Cost cutting
With Australia’s gross domestic product growth stalling through 2024, costs will likely come more sharply into focus in 2025. However, spending controls and cost-cutting are often mistakenly seen as the same thing.
Cost-cutting is typically a knee-jerk reaction to a cash flow crisis or market downturn. It is easy to be overzealous, cutting product lines and personnel that were mission-critical, or leaving the business with little ability to grow again once the crisis abates.
Foregoing specialist advice to save a few dollars can be counterproductive – the cost of major mistakes far outweighs these expenses.
Controlled spending, meanwhile, is a continual process. It is based on informed review of requirements, usage and cost versus return on investment.
One is typically emotion-led (fear), the other data-led. Consider which you prefer to be driving your business.
4. DIY
Speaking of cost-cutting, another bad habit causing strife is taking a do-it-yourself approach to financial matters. It’s akin to making your own major health diagnoses without a medical degree.
Unless you are a qualified and practicing financial advisor, accountant, bookkeeper, self-managed superannuation fund specialist, lawyer, actuary, finance and insurance broker, you simply don’t know everything there is to know about your financial affairs.
This is why foregoing specialist advice to save a few dollars can be counterproductive – the cost of major mistakes far outweighs these expenses.
5. Failing to plan
Perhaps the wisest of all cliches is ‘failing to plan is planning to fail’. Ensure you have current plans outlining your approach in 2025 for:
• Business operations – Will there be a growth and expansion phase or stabilization phase to ride out the current economic malaise? Pay particular attention to employee movements and staffing requirements, given the new year often sees people change jobs and even careers.
• Safeguards and protections – Have insurance coverage, risk mitigation, data back-ups and business interruption contingencies for everything from natural and human-made disasters to cyber risks and extended power failures.
• Ownership and leadership – Is a partial or complete sale or stock listing on the cards? New board appointments? One or more significant exits?
• Your own future – Will you still be with the business in 2025? A career change? Retirement? Without a structured plan in place, you are forced to respond to any and every change on the fly. In the heat of the moment, it is easy to overlook preferable options, forget to include certain aspects or consult particular individuals and jump to unreasonable conclusions.
Disclaimer: The information in this article is of a general nature only and does not constitute personal financial or product advice. Any opinions or views expressed are those of the authors and do not represent those of people, institutions or organizations the owner may be associated with in a professional or personal capacity unless explicitly stated.
