One of the most challenging things for any entrepreneur is trying to avoid the common financial pitfalls that can a make or break a new business. Many inexperienced or new business owners have a tough time separating their business finances from their personal finances, avoiding debt or even managing cash flow. Each of these situations can cause undue stress and sap your creativity.
Read these three tips designed to help you avoid these financial pitfalls – early on.
1. Avoid the Drawback of Combined Finances
Many small business entrepreneurs make the mistake of combining their personal and business finances in one account. While this may seem convenient at the early stages of your business, it can quickly take a turn for the worse. Combining personal and business banking accounts can cause tax problems, and negatively affect salary payments and even personal budget management. It can also cause confusion with clients and look unprofessional when receiving or making business payments. By creating a separate business bank account, you enhance your credibility as a new business, limit your personal liability and ease other aspects of managing your business, including bill paying and taxes. Consider customized checks to help you manage your finances.
2. Don’t Overinvest in a New Business
More often than not, new business entrepreneurs invest more than they should or even need to when getting a business off the ground. While it’s true that most startups need a significant investment of both money and time, and you don’t want to cut corners, be prudent when it comes to spending money on computer systems, office space and inventory, at least in the beginning. What you must avoid is excessive business debts so you can minimize and even prevent financial stress and business failure. Instead, direct your attention to producing solid quality products or services and ensuring great customer experiences. Many entrepreneurs start by working at home or purchasing items that are only necessary until the business starts to turn a profit and is in growth mode. Once the business is doing well, consider upgrading or enhancing your systems and office space. Of course, you’ll need certain business essentials, including forms, envelopes, custom checks and stationery.
3. Learn About Cash Flow Management from the Professionals
Managing cash flow for a business is a difficult skill to master for new business owners. Many startup entrepreneurs will attempt to manage their finances on their own, but like anything else, you’ll probably need help and advice from a financial planner or other professional in the field. Accountants and other tax advisors can guide you to help ensure you’re making the right financial decisions to support your success. Some tax experts offer an initial, free consultation and accountants can answer any questions you may have about cash flow management. You might also consider purchasing solid financial software for productivity and guidance.
Get professional advice as needed, invest only in what you need and keep your business and personal accounts separate. By following these three tips, you’ll have a good head toward creating (and sustaining) a successful new business.