A business, whether small or large scale, has pillars on which it stands. Accounting and bookkeeping are one of those pillars, and a faulty bookkeeping practice will bring down the whole business as is the case when a building’s pillar is removed. If you own a small business or you are just starting a new business, it is necessary for you to set up a good bookkeeping and accounting practice.
Often, you will not be able to do this on your own. You will need the expertise of seasoned professionals to help you succeed with your accounting and bookkeeping. It then becomes essential to practice outsourcing this vital part of your business. There is the need, in most cases, an urgent need, for businesses to outsource their bookkeeping activities to experts who have been specially trained for this purpose. Bookkeepers can help you achieve your financial evaluation goals with ease.
Most Common Small Business Financial Mistakes to Avoid
As all we know, not every small business succeeds. Currently, there is a steady rise in small businesses, that started cropping their business. To avoid financial loss in small businesses, we have pointed out some of the most common financial mistakes that small business owners make. Avoiding these mistakes can raise your business’s financial status and assist you to survive in the status better.
Financial Mistake #1: Making Excess Spending
All your large business spending starts very small. Spending $1 might look smaller at that moment, one cappuccino or having dinner out or paying per movie might look even smaller. But as a whole, if the spending per week costs $30 for food, then for the year, it cost $1440 per year. It will lead to extra payments and a waste of money on an extra credit card.
If you are a small business owner and facing financial problems in your respective business, then avoiding such money wastage will help you and your business in the right way to save money.
Just think of it, you left your business for a few dollars, then this will make a huge change in your business.
Financial Mistake #2: Endless Payment
Ask yourself! When you feel tight in financial status, think about all the monthly payments, which you tend to pay every month and for the upcoming year. It might be cable television, a gym membership, or a music service or might be other related monthly payments. If you are in the condition to save your money, but when you feel tight, think about this unwanted spending. Avoiding these types of unwanted monthly spending can take your business a long way toward a better financial status.
Financial Mistake #3: Buying a New Car
Currently, millions of million cars tend to be sold every month and year. But only a few business people can afford to make payments in cash. If you are a small business owner and feeling a hard to make a payment on purchasing a new car, then just think, about whether you need this at that moment. This can cost more than your financial budget.
Buying a car in interest and paying them every month might look hard for more businesses. Still, if you like to purchase a car, make that happen on a low budget – with less gas, low cost, and less maintenance.
Financial Mistake #4: Living on Borrowed Money
Utilizing credit cards for purchasing all your requirements has become more common. While an ever-increasing number of customers are ready to pay double-digit interest rates on groceries, gasoline, and more, doing so long before the bill is paid in full is not a piece of smart financial advice. Keep in mind, that the interest rates on credit cards for purchased and charged items are considerably expensive.
There are cases, that we can define, that if a small business owner uses a credit card, they might also spend more than what they earn. So using a credit card with a suitable credit card limit as per your income and expense can help you to stabilize your business money management.
Financial Mistake #5: Living on Borrowed Money
Most businesses must make sure that their business is sufficiently insured and shielded. If you are a small business owner carrying the right business insurance, then you are on the way to eliminating the financial risk from unexpected events.
Unfortunately, most business owners make a blunder by neglecting their coverage, before catching the new policy. Sometimes choosing a policy that does not fit your business is also a mistake that leads to weak business financial status.
So, make sure to choose the right insurance and policy as per your business needs which help you to take your business a long way.
Financial Mistake #5: Not holding separate accounts for personal and business purposes
As soon as you plan to start a business, first, it is more important to open a separate account for personal and business use. And you can get a credit card limit of no more than your business expense.
When you have a separate account for both, you can track the money coming in and going out of your business. Make sure you have never utilized your personal account or any funds for your business transactions and vice versa.
If a small business owner does not hold a separate account for personal and business expenses, then it leads to issues with your cash flow management and raises financial compliances related to business profits, each customer’s profitability, GST filing process, creating a budget, and establishing financial goals.
Financial Mistake #5: Not holding an emergency fund
Every financial adviser agrees with this point. Every small to large size businessers are advised to have the emergency funds separately. This is because we are not aware of what happens next in your business. There can be a drastic profit or drastic loss or drastic need for money. So as a whole, it is better to have an emergency fund ready.
Whatever may be your business budgeting, whatever may be your technique to manage your small business finance, there will always be a time for business owners, when they face expenses that haven’t been anticipated before.
Business owners, to run their business smoothly, it is advised to hold at least three months’ personal and business expenses as a contingency fund.
Financial Mistake #6: Not planning for tax obligations
Business owners will be in various states, with different federal tax obligations pending the business size, business operation type, location, and so on. If you are self-employed, all tax obligations, like GST filing, ITC claiming, and so on are handled by you as a single person.
The soundest rule of thumb is to make the business calculated quarterly payments to the IRS to bypass facing the huge tax bill at the fiscal year-end. If you pay attention and watch closely how much you own in taxes and processing steps to decrease what you owe legally will assist you to save your money and keep your business in a healthy cash flow.
Financial Mistake #7: Failing to create a budget
Budgeting is one of the important aspects of every business. When you budget your business you can accurately manage your finance and what you spend. Though there are lots of challenges in financial forecasting, creating the right one wil assist your business in the right way.
There are lots of affordable small business budgeting software for small businesses to make the business simple and effective. Without budgeting, you might bypass insurance payments, other essential expenses, and future tax obligations. Also, you might spend considerable money, when your business sales are slow, resulting in you reaching a credit card debt or business loan, in case of emergency. Just stick with your financial planning and have a transparent financial management goal for the upcoming days.
Avoiding small business finance mistakes by reaching bookkeeping firms
If you are wondering what makes bookkeeping so important, then you should read on and find out reasons why you should outsource bookkeepers.
#1 Bookkeeping Services Reduce The Workload On Business Owners
Looking at all the aspects of business like marketing, personnel management, processing, sales, logistics, and so on, businesses will be better off if their owners outsource their bookkeeping to trained bookkeepers. That way, they can concentrate on the other aspects of the business and work more efficiently. Small business owners, in particular, will cherish the extra time they get in return as they are usually bagging different roles at a time.
#2 You Want To Do Best What You Know How To Do
Just as not all people can be doctors, not everyone is good with numbers. In fact, I know more people who don’t like dealing with numbers. You can be a business owner with a good business but struggle with your bookkeeping and keeping of financial records in general. You will realize how much you need the expertise of bookkeepers.
#3 Bookkeeping Services Provide You With The Accurate Financial Situation Of Your Business
The job of the bookkeeper is to collect, collate, analyze, calculate, record data, and report financial information to the business owner. In essence, bookkeepers and accountants can assess the financial situation of your business more than anyone else. This is what they are trained to do. As a result of that training, they are able to deliver accurate and precise information, thereby promoting the business.
#4 Bookkeepers Help Business Owners Count The Cost
Bookkeepers can also take the place of financial counselors and answer the questions of the business owner on some financial issues. Business owners need such sound financial advice to help them steer the course of their business towards attaining the financial stance that they aim for.
With a bookkeeper or an accountant handling your financial affairs, you can put your mind at rest and enjoy the freedom that comes with outsourcing which means giving you time to actually enjoy doing your job.