Every business, big or small, needs to be careful when it comes to decision-making. Some business owners make mistakes that totally catch them off guard. If they had only known better and thoroughly understood the possible dangers of their actions, their businesses could have been different.
Even a small mistake can sink a business, so owners must oversee their business from a holistic point of view. If you have no idea what are the common money mistakes you need to avoid, you’ve touched down at the right place.
Here are the eight nasty but avoidable mistakes business owners make.
Not Setting Up A Business Account
One of the most commonly committed mistakes of business owners is not opening up an account that is dedicated solely to their business. Oftentimes, they use their personal bank accounts for their business, which is not correct. Personal and business finances should be separated.
If you use one account for your personal and business finances, you’ll be most likely to face negative consequences later. For example, you might confuse your business fund with your personal budget and overspend. You could also have a hard time tracking all of your business expenses and profits and get perplexed when it’s time to complete your business’s taxes.
By separating your personal account, you will be able to easily stick to your budget and avoid spending more than you should. And if your business has its own business account, it would be much easier to track down every penny that goes in and comes out.
Separating business and personal accounts is also a good way of protecting your assets. If things go wrong with your business, you will still have all of your assets and money for yourself. This means that your business would not leave you high and dry in case unpleasant business situations arise.
Immediate Big Purchase
Wanting the best for your business is natural, especially when you’re just starting out. However, before finally deciding you make a purchase for your business, you need to assess whether the purchase is essential or not.
If it’s a purchase that is crucial to your business’ production and can bring reciprocations if bought behind time, it is a necessity. But if your business can run smoothly even without it, then it is an insignificant purchase. Considering if the purchase would boost the revenue, in the long run, is important.
Don’t make big purchases while you are still starting out. Learn to operate your business from the bare minimum, then proceed accordingly from there. No matter how excited you are to bring all of your ideas into life, refrain from making big decisions on a whim.
Maximize all of your resources, and don’t buy things unless necessary. Grow your business first before buying things that will improve its operation. Otherwise, you might find yourself talking to your accountant about flown-out budgets.
Costly Personal Purchases
Although your personal funds should not be combined with your business funds, you should not rush making a costly personal purchase for yourself. Surely, you might feel like you want to reward yourself for all your hard work but evaluate your finances first before buying a car, house, luxury items, or other personal purchases.
Your business may have its own fund to support its operation, however, there are unforeseen circumstances that might require you to use your personal money to assist and help your business.
Let’s take the unpredicted COVID-19 pandemic as an example, which brought several businesses to their end. If your business was affected by the pandemic and you don’t have a solid personal financial fund, it will be challenging to rerun your business.
On the other hand, if you avoid making personal purchases, you will save enough money that can be used to operate again despite hitting a big roadblock.
Incurring Credit Card Debt
There’s a long list of reasons why you should avoid incurring credit card debt. Reckless use of credit cards is regarded as a terrible financial mistake that an entrepreneur can make.
Making a purchase with credit cards is very convenient, so there’s a big tendency for card owners to mismanage their finances. Business owners tend to overlook their compounding expenses and interest every time they make a purchase and fail to pay it in full immediately.
Credit cards can be dangerous, especially for business owners without much self-control. Hence, if you only want to use cards for the sake of convenience, getting a debit card could be a good alternative.
Debt can have an impact on the reputation of your business in the eyes of your lenders. It can affect the overall growth of your company commercially. The best rule you can implement for the advantage of your business is not to buy anything if you don’t have the capital to spend on it.
No Emergency Funds
When it comes to business, ensuring that you save up money for emergencies is important. The future cannot be seen, and no matter how much you want to avoid it, there might be unfortunate circumstances that might negatively affect your business’ finances.
Setting aside some bucks will help you rebound in situations that leave your business’ finances on edge.
No Plan for Tax Obligations
All businesses are obliged to pay taxes, which the government uses to fund the building of infrastructure and implement programs that would bring more comfort to citizens. Companies assist their employees in paying taxes, but as an entrepreneur, you should have the initiative and accountability to pay your tax obligations.
As a business owner, you should be responsible for paying all of your taxes to avoid getting hugely indebted because of your unpaid packed tax bills.
No Clear Budget for Business
You need to have a clear budget plan to easily distinguish the amount of money allocated to every domain of your business. Create a fixed budget, and once you reach the maximum amount, stay away from spending more money in that domain.
Without a clear budget, there is a big tendency that you will overspend or underspend money on a specific area of your business.
Refusing Professional Services
If you are just starting out a business, questioning why you need to hire professionals to help you in your business might have crossed your mind. No matter how good you are at running a business, you do need to hire a professional to assist you.
Managing a business can be hectic, and there’s a big chance of having everything come to you at once, from phone calls to running marketing campaigns to meetings and assisting your clients. Admit it or not, you need someone to back you up.
By hiring a professional to your aid, you will have more time to focus on growing your business without much frustration. They can also help you come up with excellent ideas that you’ve never really thought of before.
Furthermore, if you’re an entrepreneur handling a startup all on your own, you are most likely to guess which works and which are not. Although trials and errors are not entirely bad, the results you might see may not be ideal if you make too many mistakes.
Having someone who knows the ins and outs in your field of business is necessary for its success.
