6 Financial Mistakes That Will Ruin Your Business

expressed opinion entrepreneur Contributors are their own.

Small businesses can be incredibly rewarding, and many people choose to start their own companies rather than take on office jobs that don’t align with their personal goals or lifestyle. However, running your own business also means taking on new risks and responsibilities that you may not have considered in the early days of your business. Avoiding financial mistakes in your small business will save you money and prevent your business from going out of business before it gets off the ground.

Here are six of the biggest financial mistakes that could destroy your small business before it even has a chance to succeed!

Related: 6 Financial Mistakes Small Businesses Keep Making

Mistake #1: Not setting up a corporate bank account

Some people believe that since the company’s bank account is in their name and they are the sole founder of the company, there is no need for a corporate bank account. While you don’t technically need an owner to be the owner, having a separate bank account saves you from unnecessary trouble.

For example, if your business has multiple partners or investors and there is a dispute over how to allocate funds, you will want to be able to clearly show the company’s income and expense records. It will also help protect your personal finances if anything happens to your business – in which case a court order may require that your account be frozen until those financial issues are resolved.

Mistake #2: Spending money too quickly

Don’t spend any money until you fully understand what’s involved. Just because you save some cash, doesn’t mean you can spend it recklessly. The last thing you want to do is to drain your funds early, as there will be a lot of unexpected costs and bills to pay.

However, it goes both ways – if you need to raise money, don’t worry about spending it all at once. Rather than waiting months or years until you have enough savings, get your business up and running right away. It’s okay to spend every penny growing your company as long as you make sure you don’t spend too much (or at least more than planned).

Mistake 3: Ignoring Taxes

Neglecting taxes is a huge financial mistake that can kill your small job and potentially get you in trouble with the IRS. If you ignore the tax issue, even for a little while, it can snowball and eventually hurt you in the long run.

If you don’t file your taxes correctly, there’s a good chance the IRS will review your business and assess penalties (which means more money in your pocket). Not worth the risk! As an entrepreneur, one of your main jobs is to ensure that all documents are submitted on time and contain all necessary information.

Mistake #4: Not having a backup plan

Having a backup plan is essential when starting your own business. Something that can make you money when your first idea fails. This could be an Etsy shop, a side business, or additional freelance work. If the worst happens and you fail, having something to keep some income on will go a long way to making sure you can still pay your bills when you try again.

Mistake #5: Not having a marketing budget

Having a marketing budget is essential. If you don’t have the money to market your product or service, no one will know! If no one knows about it, then no one will buy it!

Also, without a marketing budget, you may be missing out on some of the most effective ways to promote your business. A major part of marketing is delivering fresh content that informs readers and entices them to take action. For example, by spending $100 on a Facebook ad campaign targeting potential customers who may be interested in your product or service, you can reach thousands of people for just a few cents each! By not having a marketing budget and not using other advertising methods such as Search Engine Optimization (SEO) and Social Media Advertising (SMA), you’re effectively losing free opportunities to generate more leads and sales.

Mistake #6: Poor money management

Mismanagement of revenue and inventory costs is one of the biggest mistakes that can lead to debt problems and bankruptcy. While revenue is important, having inventory that matches your level of demand and constantly buying more inventory when you don’t need it can drain your company’s cash flow and profitability. Maintaining healthy supplier relationships can help you reduce business costs in the long term. Discuss with your supplier how they charge for the product and ask about discounts they might offer.

Another cost-saving tip is to buy as much inventory as possible at once, rather than ordering smaller quantities over time, which can lead to increased shipping costs.

One of the best ways to get and stay financially healthy is to invest in a POS like Hana Retail. It helps small businesses with inventory control, customer data storage, and more. If you want to learn more about how a POS system can benefit your business, contact us today to make sure you avoid any of these costly mistakes!

Related: 6 things you didn’t realize were hurting your business

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