About 50% of businesses fail after 5 years. Over 30% don’t make it out of their second year of operation. The main reason why this happens is that they run out of cash.
No matter how well they plan, poor budgeting can be the downfall of any small business owner.
Common errors in finance management start with not having a plan. You’ve got to track your finances and avoid mixing your personal and business funds together. If you’re not an accountant, you shouldn’t attempt to manage your money on your own.
Want to learn more about how to keep up with your business finances? Continue reading this handy guide.
- Keeping Your Business and Personal Finances Together
If you’re a freelance writer or artist, it’s okay to keep your personal and business finances together because they’re one and the same.
If you’re not a writer, however, keep your finances separate. This will make doing your taxes at the end of the year a bit easier. If your business is sued (which is more likely than you would think), you don’t risk your personal assets getting hung up in the lawsuit.
- Bad Budgeting
You’ve got to budget for common business expenses such as utilities, insurance, rent, wages, credit cards, and equipment.
If you fail to account for everything, you’ll run into trouble within your company. You may have to let employees go, or you could lose your building.
- Making Unnecessary Purchases
When you’re first starting out, you may not know what you need as far as your inventory goes. You might get two microwaves for the break room when you could have gotten by with one.
It’s not unheard of to buy way more stock than you’ll ever sell. Despite contrary belief, you don’t need to buy everything new. As long as you do your research, used equipment will suit your needs fine.
- Trying to Do Things Alone
There’s too much that goes into running a business for you to try and do it alone. You need an accountant on your side to help you understand all the deductions and tax write-offs that your business qualifies for.
While you can do all of this on your own, it will take away from the time that you could be using to run your business. The professionals are also less likely to make costly mistakes.
Avoiding Errors in Finance Management That Everyone Makes
Making common errors in finance management can set your company back. If you fail to account for certain expenses, you may have to fire employees or purchase a cheaper building.
If you’re not careful, you could end up closing your doors for good. Stay on top of your finances, and when in doubt, hire an experienced accountant.
For more money management tips and tricks, visit the Business section of our blog.
Passionate Writer, Blogger and Amazon Affiliate Expert since 2014.