Money is at the root of every business decision, and every decision you make affects your payline. Whether you’re just starting out or have been in business for years, it’s important to understand and avoid the common mistakes companies make when it comes to their finances.
As a business owner, you want to be good with money. There’s nothing worse than watching your business lose cash because you didn’t know how to properly manage it. You can quickly improve your money management skills and keep your business profitable by avoiding these money mistakes.
Here are the five most common money mistakes businesses make and how to avoid them:
1. Don’t have a budget
The first mistake many businesses make is the need for a budget. A budget is an important tool that helps you track your income and expenses, set financial goals, and make informed decisions about where to allocate your resources. Without a budget, it’s easy to overspend and get into financial trouble.
2. Don’t separate private and business finances
Another common mistake companies make is not separating personal and business finances. Separating your finances can bring clarity and make it easier to track business expenses. It can jeopardize your personal wealth if your business is sued or experiences financial difficulties. To avoid this mistake, open a separate bank account for your business and only use it for business expenses.
3. Not keeping accurate financial records
It is imperative to maintain accurate financial records that encompass all of your company’s financial activities. Accurate records are essential to tracking the financial health of your business, preparing tax returns, and making informed decisions about where to allocate resources. To keep accurate records, consistently track all income and expenses and keep receipts or other documentation for all transactions.
4. No planning for taxes
Businesses need to plan for taxes to avoid a big tax bill catching them by surprise at the end of the year. Consult a tax professional to ensure you are paying the appropriate rates of tax throughout the year. Set aside money each month to have money on hand when it comes time to pay taxes.
5. Not insuring your business
To protect yourself, business insurance must be in place, including property insurance in the event of fire or theft and liability insurance in the event someone is injured by your property or by your product or service. Proper insurance coverage protects your assets and helps ensure the continued success of your business in the event of an unexpected event.
The end result is that you leave money on the table if you don’t correct these business mistakes. Good money management skills in your business will lead to higher profits. So if you’ve been avoiding the money side of your business, it’s time to start good money habits.