As a relatively new business owner, I sometimes worry if I am doing something right or wrong. No, I’m not losing sleep over it, but sometimes I question if I could be doing something just a little better.
And, since I used to work with business law, I saw a good amount of mistakes that businesses made. Some were probably just honest mistakes, but others made me cringe.
Below are some mistakes that business owners make:
Throwing away receipts.
Receipts are important, and you should keep them. If the receipt is for a business expense, then you should definitely keep them. At the end of the year, you shouldn’t just be guessing what your business expenses were. You should have hard proof.
If you get audited, the IRS will want hard-proof as well. They won’t want just estimations of everything.
Keeping business and personal accounts intertwined.
If you are a business owner, or if you have a side job, do you keep your sales and expenses separate? Using your personal bank account for everything can get difficult, and it’s almost always best to just keep your business accounts completely separate from personal accounts. This also makes it a little easier for when tax time comes around as well.
Not hiring an accountant.
I’m going to guess that most business owners don’t have a background in accounting, so why is it that most business owners do most of their own accounting and taxes?
Never hiring help.
When I worked in retail management, there was a fairly large business next door which never hired a single person. He worked open to close and did everything on his own because he could not trust anyone.
This then led to his downfall because there was only so much that he could do with a high-quality level of service. His store completely closed down soon after he opened and he went out of business. And, this was after he sunk hundreds of thousands of dollars into his business.
Starting a business without a plan.
Having a business plan may be the last on your mind, but it should really be the first. Do you know who your competition is? How long will it take you to make a live-able income? What type of funding will you need? Will you need to rent a space or can you work from home? Will you need employees right away? What will you be selling? How will you sell it?
Will your business allow you to eventually retire? I’ve been reading up on retirement on Suncorp’s website and this is something very important to think about when starting a business.
What other business mistakes have you seen? Have any horror stories to share?
The one that scares me is the accounting, because that’s something I think I could handle on my own, but it would probably get me into trouble somehow. Maybe I should have an accountant handle things for the first couple of years until I’m sure.
Yes, accounting can be very hard. If you don’t know what you’re doing, then an accountant is very, VERY helpful.
I would also add: making purchases and spending money ‘for the business’, even if you don’t need to. I recall years ago spending money on what I thought I ‘could’ need and it was just wasted money. Always keep that budget small and buy when you really need.
Yes, you are right. Buy only what you need.
Well, I’ve seen business start without them having any funds that they could use when an emergency occurs, that’s why their only option was to borrow money and that made their business perish.
Yes, definitely make sure you have the funds as well!
I made quite a few of these mistakes – first of all, throwing away quite some receipt because I had no accountant to tell me I can deduct those expenses 🙂 Also, working alone didn’t help and I realized that if I want to progress I need help. But yeah, you learn and adjust… it would’ve been better if I knew from starts, though.
Yes, I still forget about keeping receipts. I’m so bad with that!
One mistake that I see small businesses make goes along with what what you are saying too- just not staying organized.. Like throwing away receipts and not having a plan for your businesss. I don’t think this will be a problem for you though : )
Thanks Liz 🙂
These are good tips for business owners. While I don’t own my own business, I deal with business owners on a daily basis. The biggest mistake I see them making is not filing their taxes at ALL (common sense) and having bad credit. The businesses should also be up to date with the state, as if their entity is inactive that could be an issue.
Ack, yes those are two big mistakes!
I recently started my own business and I’m really afraid of the accounting side of things. I have an aunt who has owned her own bussine for 16 years and her first bit of advice was don’t do my own taxes and to save 1/3 of my income to pay them every quarter.
Yes, taxes are very difficult! It’s usually best to get an accountant.
I think one of the biggest problems about starting a business is not treating it as a business. By that I mean not tracking stock or projects properly, not invoicing on time and letting customer service slip. It’s easy, particularly if you start a business ‘on the side’ to treat it more like a hobby. But if you want people to take your business seriously then you need to treat it as such.
Yes, you are right. Thanks Nell! 🙂
Not hiring help, even if you are successful at working all the time, can still be terrible for your health and/or your social life. My uncle ended up starting a very successful (and still successful) garage door business in his small mountain town (filled with rich vacation home owners which helped a lot, lol) but he became such a workaholic that it started affecting his personal life. Luckily, he got some sense and started hiring part-time help and his relationship with my aunt stayed together.
That is good that he hired help! It can really destroy relationships and businesses.
Proper record keeping is certainly crucial for any business…it makes a lot of things easier; taxes, accounting etc.
Another mistake I commonly see is running “businesses in cocoons!” Where a business owner never ventures out to meet with others and see what they are doing.
In business, network like your life depended on it…one gets to learn lots that might help improve their businesses.
I agree Simon! Definitely network, there are so many positives.
Some very common mistakes made are these. I thank you for sharing and educating people. The business plan one is the most common one I have seen and it is crazy. Why wouldn’t you have a plan?
Not hiring an accountant or accounting services is a major mistake that many businesses, especially small businesses, make. So many mistakes can be made in filing taxes, payroll and bookkeeping if someone who is experienced does not handle the tasks.