by Bo, March 11, 2013
One of the most challenging areas of entrepreneurship is avoiding the common financial pitfalls that can a make or break a new business. Many inexperienced or new business owners have difficulties separating personal and business finances, avoiding debt or even managing cash flow; all three of which can be detrimental financial setbacks to a business. That is why we are happy to offer our tips on avoiding these three financial pitfalls as an entrepreneur.
1. Avoid the Drawback of Combined Finances
Many beginning small business entrepreneurs make the mistake of combining both their personal and business finances in one account. While this may seem convenient at the beginning of a business, it can quickly take a turn for the worse. Combining personal and business banking accounts can cause difficulty for tax purposes, salary payments and even personal budget management as well as cause confusion with clients and look unprofessional when receiving or making business payments. By creating a separate business bank account, it creates credibility as a new corporation, limits an entrepreneur’s personal liability and helps ease other aspects of business management including bill pay, taxes, and other money circulating through a business account.
2. Elude the Mentality of Over Investing in a New Business
More often than not, new business entrepreneurs fall into a trapping mentality of over investing in their new business. While it is true that most startups needs fiscal investment and it is not suggested to cut corners, unnecessary and in some cases unaffordable computer systems, fancy new offices or over stocking on inventory can result in business debt, extended financial stress and even business failure. Instead business owners need to direct their intentions to focusing on producing solid quality products or services and good customer experiences. Many startup companies begin by working at home or purchasing items that are only necessary until the business makes a profit. Then once business is going well, entrepreneurs will invest in new computer systems or better office locations.
3. Obtain Cash Flow Management Skills by Speaking to Financial Experts
Managing cash-flow within a business is a difficult skill to master for beginning business owners. Many startup entrepreneurs will attempt to manage finances on their own, which case, it’s recommended to speak with a financial expert about your business needs. Professional accountants or tax advisors can ensure a business remains in the positive, avoids tax mistakes and continues in the coming years. Some tax experts will offer free services through an initial consultation while accountants can answer any questions you may have about cash flow management.
Avoiding Financial Pitfalls as an Entrepreneur
One of the most challenging areas of entrepreneurship is avoiding the common financial pitfalls that can a make or break a new business. But through speaking to accounting and tax experts, investing only what is necessary for business success and having separate bank accounts, business owners can see a better chance at better business and fiscal success.