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 these 7 common-but-harmful financial mistakes.
1. 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.
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. Mixing Business and Personal Banking Accounts
As soon as your business is set up, you’ll need to open a bank account specifically for your business. You’ll also want to apply for a business credit card to help keep track of business expenses.
However, it’s important you never use your personal accounts or funds for business transactions, and vice versa. Failing to separate business and personal expenses could lead to business cash flow issues and monetary complications pertaining to balancing accounts, measuring profits, filing taxes and setting clear financial goals.