Any good entrepreneur is willing to take risks – but when it comes to finances, it’s important to make sure that your willingness to take risks as a business owner isn’t going to end up pushing you into making mistakes that could potentially be costly for your company. Whether you’ve been running a small business for some time or are just getting started, understanding some of the most common mistakes made with money by small business owners is key to making sure that you avoid making them yourself.
Not Keeping Business and Personal Finances Separate
You might not think about opening a business bank account during the early days, but the truth is that this step is essential – without it, it’s all too easy for things to become messy further on down the line. You can’t afford to cut corners when it comes to keeping your finances separate; before you begin collecting revenue from your paying customers, it’s a good idea to commit some time to making sure you have separate checking accounts, savings accounts and credit cards for both yourself and your business – even if you’re a sole trader.
Immediately Making Big Purchases
It’s natural to only want the best for your business when first starting out and in some cases, such as investing in your website and marketing, it’s good to invest as much as you can to get things off to the best start. However, there are also many areas where it pays to hold back – equipment for example, can be obtained much cheaper second-hand compared to splashing out on the most expensive, flashy stuff for your office.
Making Large Personal Purchases
If your business appears to be getting off to a good start, then it can be all too tempting to dip into business funds to finance a personal need, even if you’ve taken the step to separate your finances. However, bear in mind that the first year of your business can be very unpredictable in terms of the amount of money that you will make, so just because you’re doing well this month, doesn’t mean you’re guaranteed to the next. So, be very careful if you dip into your business funds to make a personal purchase – spending too much could leave you in a tricky situation if your business doesn’t continue bringing in as much as you’d expected.
Borrowing Too Much
There are plenty of options out there for business borrowing; thanks to small business lenders, business credit cards, and even short-term 24 cash loans from sites like BingoLoans,it’s easier than ever to quickly obtain the cash you need when you’re getting set up. However, whenever you apply for funding, it’s important to make sure that it’s an affordable step for you and you have a repayment plan in place, regardless of how much you’re hoping to borrow. Make sure that you carefully think through any borrowing decisions, as failing to do so could land your business in financial trouble for the future.
It’s easy to get caught out with financial mistakes when you’re starting a new business, so make sure that you’re aware of what to avoid.