It is the American Dream to have your own business, be your own boss, and do work that you love. There is nothing more rewarding than having a successful business. However, to be successful, all owners need to avoid these common financial mistakes.
Commingling personal and business funds is a disaster in waiting. Once you decide to start a business go to your bank and open a business checking account. This is not an option. The reasons are many, but the key reasons are:
• Having a business account will give a true picture of your business’s financial health. It will be easy to track your income and expenses and see the profitability of your company.
• The IRS frowns upon businesses that use business funds to pay personal expenses. Taking money out of the business for personal use and not claiming it as income is a big no.
• If your company is an LLC or a corporation commingling funds can pierce the corporate veil which opens the door to personal liability
This piece of timeless advice is never truer than when starting a business. Going into debt, especially credit card debt with high-interest rates, is a recipe for disaster. Believing your business is going to take off and all the money you need will coming flowing in may be true. However, it may not happen as fast as you think. In the meantime, you have to service the debt and pay the high interest making the money that does come in less valuable.
This mistake can land you in real trouble. The government takes getting their money very seriously, so it is best to have a tax account and fund it regularly. Your accountant can help you determine the amount that should be contributed.
A business does not need a big office with expensive furniture to be successful. The best course of action is to start with the bare minimum and upgrade as the business grows. The latest technology and other perks will not bring in revenue, your hard work and effort will. Stay lean until you have the funds to upgrade.
Tracking the financial trends of your business will provide you with valuable information about the health of your business. Having a month over month of your profit and losses will indicate the trajectory of expenses and income. Always focus on the bottom line.
The Certified Public Accountants at Foster Financial are here to help you avoid these and other mistakes when running your business.
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Everything You Need To Know About Form 1099-NEC
An Overview of the Net Operating Loss Tax Provisions in the CARES Act
How To Decrease Your Small Business Debt? A Step-By-Step Guide
Why Every Small Business Needs a Bookkeeper?
Tax Credits That Could Benefit Small Businesses