Bad Spending Habits That Could Hurt Your Business

As a business owner, the challenge of how to increase profits is on your mind all the time. Improving the quality of your products and services or investing more in marketing are usually the first methods businesses think of to make more money. Yet, stopping bad spending habits is also a very effective way to grow your income. You can avoid losing money on unnecessary expenses and reallocate that cash to value-driving factors. 

This article will help identify the most common spending habits that harm your business. Hopefully, you can steer clear of them to build a healthy financial environment for your business. 

The 4 spending habits to avoid for your business  

Here are the most common spending mistakes that every business owner should be aware of:

Spending without a proper budget 

This mistake is commonly seen in newly established small businesses. They don’t think a budget is necessary when their companies only have a few financial activities. This is in fact incorrect. Not having a reasonable budget can lead to multiple painful consequences like overspending, a high chance of going into debt, a lack of savings, and less financial security. 

Additionally, when your business operates without a budget, it makes dealing with unexpected expenses, cash flow management, and meeting your financial goals way more challenging. In short, a budget allows you to allocate money more wisely, resulting in saving more money.  

If you don’t know how to make a budget yet, check out our 7-step guide to create a business budget.

Inconsistently and insufficiently recording spendings 

It’s disastrous when a business fails to record spending properly. This leads to being unable to keep good track of your expenses. You have no idea how much money was actually spent, making it impossible to determine your net profit. When you don’t have spending calculated accurately, you’re unable to evaluate your financial performance; hence no appropriate business strategies can be devised to create future growth. 

On top of that, poor spending records will guarantee that you have a miserable time when tax season comes. You’ll have no concrete data to file for tax deductions, meaning you’ll need to pay more than necessary to the IRS. That’s why you should always have your spending correctly recorded in your journals. If you don’t have enough time to do the recording, it’s best to outsource a freelancer or a professional bookkeeper.   

Another tip to avoid this bad spending habit is to keep your receipts. Every purchase goes together with a receipt. Keeping and organizing the receipts will help you better keep track of your spending and be ready to provide the IRS proof for tax deductions when required. 

Shoeboxed can help you do this with ease. Shoeboxed is a receipt scanner application that digitizes your receipts in just seconds. Your receipts will be safely stored in the cloud and easy to search whenever needed. Scanned documents from Shoeboxed are also legible and fully accepted by the IRS. 

Don’t lose money to Uncle Sam!  Get your receipts and bookkeeping records organized today! 

You might also be interested in: 7 Bookkeeping Practices Every Business Should Implement.

Not paying your purchase orders on time

Many businesses habitually pay their purchase orders as late as possible, which is fine as long as you pay them on time. This is because not paying on time can have serious consequences in the long run. The most obvious result is late payment penalties. 

While penalty costs may not be much for each purchase order if your payment is only a little late, those small penalty fees add up to hurt your profit. On top of that, late payments will severely harm your business reputation in the long run. Suppliers who may have heard about your history of late payments will be wary of doing business or offering you a good deal. 

Such problems won’t happen if you take extra care with your payment deadlines. Make sure you have the money/documents ready and processed at least a few days before the due date to have enough time to deal with any unexpected issues that arise. 

Using your personal credit card to pay for your business expenses 

Drawing a boundary between personal and professional spending can be confusing and difficult for self-employed individuals, small business owners, and freelancers. That’s why many of them end up using the same credit card for personal and corporate purposes for convenience. However, this habit may not be the best, and there are multiple reasons why. 

Using your personal credit card for business expenses will prevent you from building your business credit history. Without a good business credit history, you’ll find it challenging to apply for business loans, equipment leases, etc. because before lending you money, investors and lenders always check your business’s credit history. 

Additionally, a personal credit card has a lower credit limit than a business credit card. For that matter, your personal credit card will be of no use when you need to acquire something expensive for business purposes like machinery and equipment, office renovation, lease or rent, etc. 

Lastly, this spending habit makes your tax filing process painful. Trying to find business costs by going through your personal credit card accounts takes time, can lead to mistakes, and may even result in an audit. Keep these costs in one place – your company credit card – to make things easier for yourself.

You might also be interested in: Which Small Business Credit card is Best for Your Biz?

Want to read more about business? 

If you’re interested in entrepreneurship stories, business tips, or productivity tools, find more posts like this on the Shoeboxed Blog. Shoeboxed is a well-trusted tool to help businesses, freelancers, and DIY accountants store and organize their receipts. It quickly and efficiently digitizes your receipts and documents, then automatically extracts, categorizes, and human-verifies important data from your receipts. You can scan their receipts, manage expenses, store business cards, and track business mileage easily, helping you boost productivity and bring in more revenue. 

Go paperless with Shoeboxed for FREE today! 

Five Foundations of Personal Finance – The Essentials

If you’re interested in learning about the five foundations of personal finance and how to manage your money correctly, you’ve come to the right place.

In this article, we’ll walk you through the five foundations of personal finance and a five-step plan to assist you in navigating your finance path, the fundamentals of managing money, and a bonus of a few solutions to keep things running smoothly and efficiently.

What is personal finance? 

Personal finance, in summary, is how you manage all of the income you make or get. 

Personal finance usually entails devising a strategy for allocating funds. You could divide your earnings into such categories: 

  • Income: All of the money you make or receive. Compensation and rewards, retirement, profits, and money received as gifts are all examples of income. 
  • Spending: Where did your money go? This category includes both needs like rent or mortgage payments and food, as well as non-essentials such as entertainment, activities, and whatever else you buy just because you want to. 
  • Saving: Do you have a large sum of money in your shoebox? You can also save money by putting your funds in a primary savings bank or making investment money market products. 
  • Investing: Equities, shares, and unit trust are joint holdings, like investments in real estate holdings or private enterprises.
  • Protection: Emergencies and unplanned situations should be planned for. This entails obtaining different types of insurance, such as health or insurance products. It could also entail planning for the future.

Five Foundations of Personal Finance 

A financial knowledge strategy is as individual as the person who creates it. There is no one-size-fits-all approach but a few recommendations to follow when you construct your own. Here are the five basic foundations of personal finance: 

Determine goals and priorities

To create a budget and begin your plan, first, you need to understand what you truly want from the near and distant future. 

Ask yourself the “big” questions like

  • What other finances do I desire? 
  • What kinds of things do I want to own? 
  • What kinds of experiences do I want to have? 
  • What is the state of my work, parents, and private life? 
  • What would I like to modify about my present situation?

By answering these questions, you’ll be able to determine your spending limit, and even adopt a long-term perspective rather than focusing just on covering this year’s budget expenses. 

Don’t be concerned if these questions are challenging or if you don’t know how to respond with certainty. The goal isn’t to schedule your entire life; instead, it’s to get you beginning to think about it so you can eventually build your roadmap. 

Remember that your financial planning blueprint should be as adaptable as your life. Maintain fluency and try to prevent “analysis paralysis,” which prevents you from ever initiating!

Assess current financial situation 

Before creating a personal finance strategy that understands your daily existence and needs and wants, you must first fully comprehend who you are. 

This begins with a simple examination of two factors: 

  • Income stream, also known as “money in vs. money out,” is the amount you earn and spend each month. 
  • Net worth is the amount of money and assets you currently own, less your incurred debts, such as outstanding credit card payments.

A simple — yet useful — practice to understand and control your financial situation is to keep track of your personal spending. For example, you can keep track of the receipts for your purchases to see how much you’ve spent each month. By collecting the receipts that you receive, storing them, and reviewing them on a regular basis, you’ll be aware of your spending habits, and can then adjust if needed. 

There are many ways to store receipts, however, we suggest digitizing your paper receipts with a receipt scanning app. And Shoeboxed can help you with just that! Shoeboxed is a receipt-tracking and expense-managing service for freelancers, sole proprietors, and small business owners. You can capture your receipts, and the app will automatically extract the key data, categorize and organize them, and even generate expense reports for you. You can clear your wallet, desk, and drawers from bunches of paper receipts while storing them safely for years! 

What’s more, Shoeboxed offers OCR (Optical Character Recognition) engine and human data verification features, ensuring that the digital versions of your receipts are scanned in precise format, well categorized, and contain human-verified information that is approved by both the Internal Revenue Service and the Canada Revenue Service. And last but not least, you can even track mileage for business and store business cards with the Shoeboxed app. Doesn’t it sound great to access all your important information with one touch? 

Pay-off debt 

If you already have borrowing (college tuition, credit card bills, etc.), make it a priority to pay it off as soon as possible. The faster you can pay off your debt, the less interest you’ll have to pay. That means you’ll be able to keep much more of your money over the long term.

It may be painful to look at the figures, but it is necessary for personal finance management. The earlier you can create and implement your strategy, the better off you’ll be compared to the financial circumstances you’ve been fantasizing about.

Set a budget

The most exciting thing that can be done in your financial health is creating and estimating costs. It ensures that you are functioning toward your objectives, and having a specific amount to comply with will help keeo you responsible every day, week, month, and year. 

Your spending plan should clearly present your income and unfunded liabilities. To achieve that, you can start by asking yourself such questions: 

  • Do your outgoings usually outweigh your inflows? If so, how much? 
  • Where might you start by cutting back on your spending? 
  • Is there a great bonus or another way to earn more money on either corner of the operating cash? 
  • What amount of money would you like to pay against your loans each month? 

Calculating a monthly spending limit will help you connect your income and expenditures– or widen the numbers so you can save even more money. 

You can create an Excel spreadsheet, note, or use a personal finance app/software to keep track of your assumed responsibility for each period.

Save money monthly 

Every brokerage will advise you to save for an urgent situation. This fund would cover nearly 4 to 6 months of your expenditures in a perfect scenario if you lost your job. 

If you have significant debt, saving money may seem impossible. That is understandable. 

However, you should indeed begin by having saved even just a tiny amount. Begin by putting $5 in your piggy financial institution or saving account on your banking app each week. Add “Savings” as a cost to your liquidity worksheet so that you can keep records of it. You can increase your savings amount to $10, then $20 each time, and so on.

If this sounds too difficult, you can start with considering what you thoroughly appreciate and what you can do without. Don’t abuse yourself – it’s essential to spend money on what makes you happy. 

Instead, you can determine which expenses you can conveniently reduce rather than become unhappy. For example: 

  • Cook more as food products are less expensive than eating out. 
  • Revoke or stop any club membership or subscriptions that you don’t need.
  • Take public transport or ride a bicycle rather than getting an Uber or driving your car. You’ll also benefit from some light exercises. 
  • Sell several items that you have bought but never used. We’ve all got a lot of those.

You might also be interested in: Amazing Ultimate Guide To Effective Family Finance Management.

The bottom line

Financial planning is not as relaxing as a walk in the park. However, the better you understand how everything works and incorporate that understanding from your objectives and condition, the more straightforward and more effortless it becomes. 

Starting from understanding and managing the five foundations of personal finance properly, you’ll be able to control and develop your financial plan and even take it to new heights. 
Don’t forget to sign up for the Shoeboxed blog for more engaging success stories, entrepreneurship, DIY accounting, together with the latest Shoeboxed product update.

Top 3 Fintech Stocks to Buy In 2022

The fintech industry has seen rapid growth in recent years and shows no signs of stopping. Fintech is present in our everyday lives, whether we realize it or not. From sending money to your friends online to paying for a car ride using your wallet app, fintech is here to stay.

According to the Global Fintech Adoption Index, the fintech industry grew by a massive 48% between 2015 and 2019. Experts are also forecasting the global fintech market will be worth up to $190 billion by 2026, with a compound annual growth rate of more than 13%.

In this article, we’ll give you an introduction to the fintech industry and list the top 5 best fintech stocks in the current market to consider for your portfolio.

What does Fintech mean?

Fintech is short for finance and technology – a broad term referring to any business that uses technology to streamline and improve various financial services. 

For example, Kabbage, a fintech giant, leverages Big Data and advanced, sophisticated algorithms to let users make instant lending decisions and loan each other money digitally (P2P lending) without the need of a traditional financial institution. In other words, Kabbage uses technology to simplify and enhance the lending process. 

Another example is smartphone apps that use near-field communication (NFC), quick reference (QR) codes, or barcodes to initiate in-store payment instead of a physical credit/debit card or gift card. Apple Pay and apps from merchants like Starbucks are among the most popular apps in this category.

See also: How Digital Transformation Affects the Future of Accounting.

Different types of Fintech 

As fintech is an umbrella term – any business can represent fintech as long as they use technology to improve financial processes. That’s why fintech can be found in a wide range of sectors, from HR & Payroll to eCommerce & Marketing. 

Source: S&P Global 

See also: What Is The Future Of Fintech And Why Businesses Should Not Resist.

3 Best Fintech stocks to buy in 2022 

There’s a wide range of fintech companies to keep an eye on and invest in. Just remember, investing is a long-term game and you might see your stock swing significantly along the way. 

Below are the top 3 fintech stocks that you should consider buying:

Visa Inc. (NYSE: V)

Visa is the world’s leader in digital payments and one of the biggest fintech companies. Visa is not a traditional bank – it does not issue credit or debit cards. It’s a payment processor, providing the network between the bank issuing the card and the merchant accepting that card as payment. In return, Visa receives a fee from every transaction that takes place on its network in exchange, resulting in billions of dollars in profit and revenue each year.

According to Visa’s 2021 shareholder letter, the company expanded its reach to more than 80 million merchants, a 14% rise. Visa has also invested more than $9 billion in technology over the last five years and continues to do so to ensure that its users are comfortable and secure in shopping digitally.

Paypal Holdings, Inc. (NASDAQ:PYPL

PayPal Holdings (NASDAQ: PYPL) has become a household name for online payments over the last two decades. It has more than 400 million users in more than 200 markets all over the world. More importantly, PayPal’s peer-to-peer mobile payment service Venmo has grown into an industry leader and continues to expand its massive user base at an incredible pace. In 2022, PayPal is launching Pay With Venmo on Amazon.com Inc.’s (AMZN) platform. This partnership comes as online purchasing activity has skyrocketed during the worldwide Covid-19 pandemic, with 47% of Venmo users expressing interest in paying with Venmo when checking out with merchants, according to Venmo’s Behavior Study.

Logan Purk, a senior research analyst at Edward Jones, says, “It’s likely they will continue to deliver on their long-term growth algorithm, which is 20%-plus growth, which we think over time results in fairly attractive returns for shareholders.” He continues, “PayPal continues to expand its services such as peer-to-peer payments, Venmo, crypto, and buy-now, pay-later,” which will definitely strengthen PayPal’s position in the Fintech space.  

See also: PayPal vs. Stripe: Which Payment Solution is Best for Your Small Biz?

Intuit Inc. (NASDAQ: INTU)

Have you ever used TurboTax to file your tax return? 

Intuit owns TurboTax and other financial software like Quickbooks, Mint, and Credit Karma. This company is listed as one of our top picks due to its established customer base and rapid growth. The company’s revenue increased to $2 billion in the most recent quarter from $1.3 billion just a year ago, and it expects to reach $12 billion in 2022, equivalent to a 26% to 28% increase. Intuit has been striving to build a complete and perfect platform for SMEs businesses, streamlining complex and lengthy accounting processes. 

Another fintech tool (not a fintech stock) that can also help you transform your accounting and financial process digitally is Shoeboxed. Shoeboxed is an online receipt scanner app that allows you to turn your stacks of paper documents into digital with just a click. AI-powered technology automatically extracts and categorizes important data from your receipts. Fast and secure, Shoeboxed is the best option to digitize your accounting procedures. 

Final thoughts 

The COVID-19 pandemic caused a permanent shift to digital preference in almost every aspect of life, especially in banking and payments. 

Fintech companies have grabbed this opportunity and shown robust growth, promising a bright and fruitful future for fintech stocks investors. 

Sign up for Shoeboxed Blog now if you’d like to read more stories about entrepreneurship, technology, and financial tips, along with the latest Shoeboxed’s product updates.

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