Don’t Make These 5 Mistakes With Your Small Business Finances
Understanding how to manage working capital properly is often the key to building a successful business. Here are common mistakes some business owners make that put their financial future in jeopardy:
1. Not Creating a Business Plan
It’s easy to think that business plans are only for investment pitches. Actually, your business plan is just as much for you as it is for outside funding. A solid plan guides the decisions you make and establishes what your company is about, what goals you have for it, and what steps you need to take to get there. Always be specific when setting growth expectations and financial targets.
2. Being Afraid To Invest Resources in Growth
While being debt-free feels great, it’s ironically not always the best thing for your business. Applying for loans to capitalize on financial opportunities is essential, whether it means having enough working capital to purchase technology or money to hire additional staff. Investing small business finances into your company drives further revenue in a progressive and profitable cycle.
3. Not Preparing for Emergencies
No matter how well you administer your business, emergencies can pop up that require access to quick funds. In order to always be prepared for the unexpected, there are two steps you can take. First, open a business savings account immediately on creating a new company, setting aside a certain percentage of profits each month. A line of credit backing your small business finances is another lifesaver that allows you to pay employees and providers in emergencies, keeping your business up and running.
4. Forgetting To Plan for Taxes
On your checklist to launching a new business, tax preparations should be near the top. Many entrepreneurs get so wrapped up in the day-to-day details of purchasing and employee management that they totally forget about taxes until the beginning of April. Setting aside funds for quarterly tax payments makes life much easier. Another great way to give your business a solid tax footing is to consult with a professional accountant. Tax accountants can explain complex tax requirements more simply.
5. Not Applying for a Separate Business Bank Account
It’s tempting to pay for preliminary business expenses out of pocket, especially if you operate a small sole proprietorship. However, keeping personal and business finances separate is extremely important for liability reasons and for simplified accounting. With separate business accounts, you know exactly how much money you spend, and on what. This gives you better control over business expenses.
By avoiding these five common mistakes and managing your small business finances correctly, your company is able to adapt to changing economic climates and maximize profits at the same time.