Small businesses commonly make big mistakes when it comes to their finances, but they don’t realize it until it’s too late. Trial and error can be part and parcel when it comes to business, however, why should you make the same old mistakes many businesses are making if there’s information out there that can stop you?
Below, we’ll discuss some of the big financial mistakes your small business could be making and what to do about it.
Making Big, Unnecessary Purchases
You should not, under any circumstances, be making big unnecessary purchases. This is especially important if you’ve just started and don’t have a steady income yet. If you have a construction company, for instance, why would you get your supplies for somewhere expensive when you could get the things you need of a high quality from WeldingOutfitter? It’s important to do your research so you know what vendors and suppliers are best for you to work with – plus, you should be thinking about buying certain items second hand so as not to waste too much money. You should remain frugal in your business, even when you have more money to spend!
Not Getting Business Insurance
Your company must be well insured and protected, or you’re putting it at risk. When you have the right level of business insurance, you’ll eliminate financial risk from unforeseen events. Many businesses make mistakes when it comes to their insurance. Some cancel their old policy before they have a new one in place, and others don’t pick the right level of insurance cover at all.
Mixing Business And Personal Accounts
Once you have your business set up, you’ll want to open a bank account specifically for your business. You’ll also want to make sure you have a business credit card so that you can keep track of your business expenses. You should never mix your business and personal accounts – if you don’t separate them properly, you could experience cash flow issues and monetary complications.
Getting Into Credit Card Debt
Ideally, you won’t be spending money that you don’t have. Using credit cards is fairly common in business, but if you can’t manage these payments properly, you shouldn’t be using them at all.
No Emergency Fund
Many financial experts agree on one thing: you should have an emergency fund, just in case your business experiences hard times. You never know when you might need some cash for unexpected expenses. Having 3 months of expenses saved up can help you to navigate those hard times.
Not Planning For Tax Obligations
Planning for tax obligations right from the beginning is a must – and doing it yourself is not recommended. Hire a professional from the start, as they know more about business loopholes and tax relief than you do. You may think that you’re saving money by doing it yourself, but this is rarely the case.
Are you making any of these big financial mistakes? Let us know in the comments below. Thanks for reading!