As a small business, you may think you’re safe from the following mistakes, but that’s simply not true! In fact, the smaller your business is, the more important your financials are to the success of your business and possibly even the wealth and health of your family. A small error can stunt your growth and end in financial disaster.
One of the most common mistakes, if not the most common among entrepreneurs, is mixing personal and business funds together. The more mixing of the two, just like the quarters, the harder it is to separate when it’s time to report income or file taxes.
The Fix: First, make sure you have separate bank accounts. When taking out business funds for personal use (draws), take out the exact amount of cash and keep a record of it.
Maintain separate credit cards for business and personal and pay tax payments from your personal accounts when incurring a tax expense related to your personal expenses.
Losing track of a single transaction can cost your business thousands of dollars. We’ve come across numerous clients who have lost track of invoices and never billed a client for a significant amount of work.
The Fix: Proper bookkeeping can prevent these transactions from slipping through the cracks. If you don’t have a good bookkeeping process in place, get one! If you’d still like to handle it yourself, develop a system where you create a record of every ingoing and outgoing transaction as soon as it’s made.
All entrepreneurs need professional help. Just because you are skilled at sales doesn’t mean you are proficient in accounting or even managing day-to-day tasks.
The Fix: Don’t force yourself into important aspects of the business that you have no interest or skills in. If you don’t know what you’re doing and don’t have the time to learn, get a professional to help. The money you spend will be a better investment than an inefficient use of your time.
