There’s a steady increase in the number of small businesses cropping up. Unfortunately, not every business will succeed financially. To avoid demise, business owners must tactfully avoid common financial mistakes. Hiring a local accountant or local CPA in Denver can help ensure your small business is on the right financial path. Steering clear of these financial mistakes could be the key to survival.
We all know the big ones, not having a budget, not investing, running up credit card debt. If you’ve avoided or overcome those, well done! But you might not be out of the weeds yet. There is a whole list of mistakes people make with their finances. Here are some you might not be on the lookout for.
1. Don’t Pay Yourself First
Whatever money was leftover at the end of the month is the money that should be saved for the future of the business.. Sometimes there might be money leftover, but more often, there may not be. It takes discipline not to spend money. But not to spend what you never see. Have a portion of your salary auto-deposited into your investment account, or, at least, a savings account, so that it’s out of sight, out of mind, and out of your hands.
2. Neglecting Business Insurance
It’s crucial that you ensure your company is well insured and protected. Having the right business insurance eliminates financial risk from unforeseen events. Unfortunately, many small business owners (SBOs) make the mistake of canceling their coverage before having a new policy in place, or not choosing the policies that best fit their business’s needs. To be sure you’re choosing the best insurance and liability services to protect your business, check out this blog post, The Basics of Small Business Insurance.
3. Making Large and Unnecessary Purchases
When setting up your company, you may be tempted to purchase the latest technology, a comfy office space, or hire only the most credentialed employees—all of which cost a lot of money. Resist the temptation to use your business loan or financial backing to make personal or unnecessary business purchases. Instead, choose to only spend your money on things that are absolutely critical for your business to run. Be as lean as possible in both your business and personal life until your business has grown enough to allow for such spending and still have money left to save.
4. Not Saving for Lean Times and Emergencies
From Benjamin Franklin to today’s best finance experts, there’s no shortage of people telling you to keep an ample stash of savings at hand for unexpected expenses.
Call it saving for a rainy day, but there will be times when something happens and covering the cost using your credit card is a shortsighted solution that only tends to create more problems down the line. A local CPA or local accountant will advise entrepreneurs to keep at least three months’ worth of expenses in an emergency or contingency fund for both their business and their personal expenses.
5. Not Planning for Upcoming Tax Obligations
Different types of businesses have different federal and state tax obligations, which allow governments to finance infrastructure and programs that benefit citizens.
However, back when you were a full-time employee before you started your own business, your employer would give you an easy-to-decipher W2 form every year when it came time to file your income taxes. Now that you’re self-employed, you’re responsible for taking the initiative and paying your full tax obligations on your own throughout the year.
As a self-employed individual or corporation, you must make estimated quarterly payments to the IRS so that you’re not stuck with a massive tax bill come April each year, and accurately calculating these requires some time and effort. Plan accordingly as this is now just a part of being in business for yourself. If you don’t know where to get started, call a local CPA or local tax accountant.
6. Failure to Diversify Your Funds
A common mistake that most business owners commit is putting the majority of their resources into their business. They do this in their best interest without thinking about the possibility, undesirable things that can happen, such as the failure of the business. A wise financial move is to diversify your wealth apart from your business. This allows you to be prepared in case the unexpected happens.
7. Ignoring Your Credit Score
Having a good credit score can save you thousands of dollars in interest over your life. The better your score, the better the rate of interest you’re offered when you borrow money for things like cars, homes, and personal loans.
8. Not Having a Realistic Revenue Forecast for the Future
A revenue forecast is an educated prediction about how much money your company will likely bring in. This helps you estimate what you can afford to spend and what your profit margin will be. This is needed for business planning, such as hiring new employees or launching a new marketing campaign. Without a thoroughly researched and realistic forecasting, it will be easier for your business plans to fail.
9. You Don’t Ask For Help
However your small business is struggling financially, a local CPA or local accountant has all the financial answers to your problems! It is better to ask for help from a financial expert than to watch your business fail. Investment in outsourced accounting services and outsourced controller services can provide a great return for your business and help you make better business decisions.
The Bottom Line
Whether you’re just starting a new business or trying to grow an existing one, managing your business’ finances properly is important to your success. One wrong financial decision may cause your business to fail. Make sure to avoid the above money mistakes most business owners make to keep your business away from any major financial trouble. Hire a local CPA or local accountant in Denver to ensure your business is on the path to success!
Limitless Investment and Capital Local CPAs and Local Accountants in Denver
It’s far easier to lose money than it is to earn it. While a single drastic financial decision can cause a business to fail, failure more often than not follows a series of bad decisions and financial mistakes. You can avoid these mistakes by hiring a Limitless Investment and Capital local CPA in Denver who will give more attention to the details of your personal and business cash flow throughout the year. For pricing and more information, please fill out a quick form today!