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Small business owners often learn valuable lessons after making mistakes. But making big financial mistakes can cost you! Working with a bookkeeper can help you make smart financial decisions for your company. In addition, these tips from CloudSwipe will alert you to a few financial mistakes you might have been making and show you how to remedy these issues.

Lack of Funding

What if you simply don’t have enough capital to effectively operate and grow your business? If you cannot entirely fund your business from your personal savings, you can look into applying for small business loans. 

There are several different types of small business loans. You might be able to secure a loan from a bank, which comes with lower interest rates, but sometimes, small business owners can have a hard time getting approved for bank loans. Alternatively, you may be able to qualify for a loan from a private lender.

Combining Business and Personal Finances

Many small business owners combine their personal and company finances without considering the potential problems with this choice. Fortune Builders states that merging your finances means that the IRS could audit your personal finances if you make a mistake when filing your business taxes. To keep your finances separate, you can open bank accounts and credit cards exclusively for business use and structure your business as an LLC, which will protect your personal assets. Fortunately, you can use a formation service like ZenBusiness to register your LLC in as few as five minutes. 

Failing to Manage Cash Flow

New small business owners can struggle to increase their cash flow. Some months, you might find yourself running short on funds, even if you’re owed lots of money. To boost your cash flow, Ramp recommends carefully monitoring and reducing your expenses where possible, sending clear invoices and incentivizing clients to pay early, and asking for deposits upfront when you’re starting big projects.

You can also save money on professional services by turning to free and low-cost online tools that fulfill certain tasks. For example, a site like Social Pilot can replace hiring a social media manager, and it can easily schedule posts and provide regular analysis. If you’re still hoping to create the ultimate logo, you don’t need a graphic design agency. A free online logo maker like the one from Canva gives novice designers all the necessary tools to create bespoke logos at hardly any time at all. 

Overspending

It’s quite common for small business owners to get swept away with overspending on items they don’t really need. From stationery to office snacks to unnecessary software, it’s important to take stock of where your money should be going. 

For example, as a solopreneur do you really need to rent a large office space to meet clients? Instead of spending a fortune on unused office space, upsize your apartment to something that can accommodate your business from home. You can find a place in Old Town with an extra bedroom that can function as an office, and maybe even a complex with amenities like a conference room. Plus, if you’re close to the Metro, you could even save on gas. Frivolous expenditures eventually add up, and can ultimately affect your bottom online. 

Neglecting an Emergency Fund

You may keep an emergency fund to cover your personal expenses. Having a few months’ worths of living expenses stashed away in a savings account allows you to feel more secure. But you should also create and maintain an emergency fund for your business! 

When you have a company emergency fund, going through a slow month or two does not mean that you have to panic or immediately start pivoting your business strategy. Instead, you’ll be able to draw from this account to pay your employees, cover your operating costs, and more. In short, having a company emergency fund will bring you peace of mind during tough times.

Falling Behind on Taxes

When you were working for someone else, your taxes were automatically deducted from your paycheck – but now that you’re running your own company, you are responsible for filing your own taxes! To make sure that you fulfill all of your reporting requirements, you can track your income and expenses with accounting software. 

Even if you do use accounting software, you can still work with a bookkeeper to guide you through the process. After all, figuring out the small business tax code can be quite confusing, and the laws vary state by state. Therefore, hiring a bookkeeper is a great investment that can save you lots of time and money!

Running a small business means you’re constantly learning more about which strategies will help you move your company forward. Making some mistakes is inevitable, but you do not have to make these common financial mistakes and pay the price. With these tips, you’ll be able to dodge these financial pitfalls.

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