Being a brand new entrepreneur can be overwhelming. There are a lot of things to focus on, not enough time in a day or money in the bank account to do everything on the list, and, to top it off, unexpected situations occur when you need them least.
Happily, this situation is not a given. Some entrepreneurs learn business the hard way, through their own mistakes. But if you’re open to learning from thousands of other business owners’ mistakes, you’re at least a couple of steps ahead. So if you’re ready to set the foundation for a healthy business, keep on reading
5 Financial Mistakes You Might Be Making
1.Not Keeping Records
As a brand new business owner, you might think that it’s more important to bring in new clients and deliver stellar service to make sure they come back than to keep track of all the paperwork. We know bookkeeping is not fancy work, but it still needs to be done preferably by someone who sees the fancy in it, like an accountant.
2.Mixing Personal with Business Finances
In the starting years of a business, mixing personal and business finances might seem like a good idea. But having personal expenses on the company accounts will not seem trustworthy for a potential investor or creditor. At the same time, resorting to your personal accounts for business expenses can put too much strain on your personal finances and affect your relationship with your partner.
3.Not Having a Cash Reserve
Having money aside seems to be an omen for bad days, and no new business owner wants to kill their enthusiasm thinking of bad days. But they do happen when you least expect them. So it’s better to be less enthused today and start putting money aside than to be surprised by a crisis and not have a backup to fall onto.
4.Not Putting Money Aside for Tax Bill
Just like bad days, tax days are what most business owners would postpone if they could. And this is why very few of them save money for the tax bill and need to stretch out any reserve – from business or personal accounts – to pay up the bill. You can avoid the stress of relying on your personal finances by saving money for tax purposes every month. Ideally, it would be tax equivalent of that month’s income. But if that’s too much, don’t get discouraged and put aside as much as you can afford right now – every pound matters.
5.Thinking You Should Do It All
A lot of small business owners are afraid to delegate tasks and create a team around their business, thinking it would cost too much. The truth is that if you do it right, delegating tasks is an investment and brings in more money than goes out in wages.
The alternative is to do it all by yourself – customer service, marketing, accounting, sales, product management, and so on.
And while it can be sustainable for short periods or businesses with fewer clients, being a one-(wo)man-show is the most expensive scenario. It costs you focus, time and energy, and prevents you from growing a business that can serve more people and bring in more revenue.