6 Financial Mistakes That Will Destroy Your Business – News
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A small business can be incredibly rewarding, and many people choose to start their own business rather than pursue an office job that doesn’t fit their personal goals or lifestyle. However, running your own business means taking on new risks and responsibilities that you may not have considered when starting out. Avoiding financial mistakes in your small business will save you money down the road and prevent your business from going bankrupt before it starts.
Here are the six biggest financial mistakes that can destroy your small business before it even has a chance to succeed!
Related: 6 Financial Mistakes Small Businesses Make All the Time
Mistake #1: Not creating a business bank account
Some assume that since a company’s bank account is in their name and they are the sole founder of the company, there is no need to have a company bank account. While it’s true that you technically don’t need it as a landlord, having a separate bank account can save you a lot of unwanted hassle.
For example, if your business engages multiple partners or investors and disputes arise over how to divide the money, you’ll want to be able to show clear records of the money that has flowed in and out of the business. It will also help you protect your personal finances in case something happens to your business. In such cases, a court order may require your accounts to be frozen until the financial issues are resolved.
Mistake #2: Spending money too fast
Don’t spend money until you understand what it involves. Just because you’ve saved money doesn’t mean you can spend it lavishly. The last thing you want to do is run out of funds early because there will be a lot of unexpected expenses and bills to pay down the line.
However, it goes both ways – if you need to raise funds, don’t worry about spending them all at once. It is better to start your business now than to wait months or years until you have enough savings. As long as you make sure you don’t overspend (or at least overspend), you can put every penny into growing your business.
Mistake #3: Ignoring taxes
Ignoring taxes is a huge financial mistake that could kill your small business and possibly land you in trouble with the IRS. If you ignore a tax problem, even if it’s just for a little while, it can snowball and hurt you in the long run.
If you don’t file your taxes correctly, the IRS will audit your business and impose penalties (meaning more money out of your pocket). It’s not worth the risk! As a contractor, one of your main tasks is to ensure that all documents are filed on time and that all required information is included.
Mistake #4: Not having a backup plan
When starting your own business, having a backup plan is essential. Something that will save you money if your first idea fails. It could be an Etsy shop, a side business, or additional freelance work. If the worst-case scenario comes to pass and you fail, having some income on the side will go a long way to ensuring you can pay the bills when you try again.
Mistake #5: Not having a marketing budget
Having a marketing budget is essential. If you don’t have the money to market your product or service, no one will know! And if nobody knows, nobody will buy it!
Plus, without a marketing budget, you risk missing out on some of the most effective ways to promote your business. A big part of marketing is delivering fresh content that informs readers and inspires them to take action. For example, by spending $100 on a Facebook ad campaign targeting potential customers interested in your product or service, you can reach thousands of people for pennies each! By not having a marketing budget and not using other advertising methods such as search engine optimization (SEO) and social media advertising (SMA), you are essentially losing free opportunities to generate more leads and sales.
Mistake #6: Mismanagement of money
Mismanagement of income and inventory costs is one of the biggest mistakes that can lead to debt problems and bankruptcy. While revenue is important, having inventory on hand that matches your demand levels and constantly buying more inventory when you don’t need it is a drain on a company’s cash flow and profits. Maintaining a healthy relationship with suppliers can help keep long-term costs low for your business. Talk to your suppliers and ask them how they price their products and what discounts they can offer.
Another tip to keep costs down is to buy as much inventory as possible at once rather than ordering smaller quantities over time which will increase shipping costs.
Investing in an outlet like Hana Retail is one of the best ways to stay financially healthy. It can help small businesses control inventory, store customer data, and more. If you want to learn more about how POS systems can benefit your business, contact us today and make sure you avoid one of these costly mistakes!
RELATED: 6 Things You Don’t Realize Are Hurting Your Business
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