No one is born understanding the science of finance or the common sense of money management. Running a business isn’t the same as managing a checkbook, although there are some checkbook lessons that can certainly be useful. Being money savvy is about learning by the mistakes of others in time to avoid making the same blunders yourself.
Let’s take a look at a few financial snafus you should be on the lookout for:
Small Business Money Mistakes You Can Avoid
Don’t put off hiring the experts – Accountants and lawyers whose hourly fees seem exorbitant are paid well for a reason. They can save you money by keeping you on the right track. At the start of your business management career, hiring a specialist to help you get established may seem like an extravagance. It’s when you’re starting out, though, that you need — really need — the advice of a good attorney, accountant and possibly a human resources consultant.
Avoid using personal credit for business expenses – If you’re relying on personal credit to float your business or you’ve considered leveraging personal assets like your home to get your business going, you’re putting your financial future (and potentially your family’s security) in jeopardy. You already know it’s a risky move.
Develop a track record – When your business is relatively new, it’s easy to think that a few good months mean that you’ve hit the big time. Before you move to a larger facility and spend valuable profits on non-essentials, make sure you have an earnings track record. That big new customer may not like your delivery schedule and back out after a few months, or your products may be more seasonal than you think. Breathe a sigh of relief because you’re finally in the green, but don’t write any big checks for a while.
Expect success but plan for problems – When you’re starting out, it’s comforting to think you have plenty of time to get established before you have to start fielding some of life’s problems. The reality is that any number of things can go wrong on your way to becoming a successful business owner. That’s what insurance is for. Get and keep your affairs in order. Have a will or a revocable trust in place. If you’re hurt and can’t work, make sure the company brain trust isn’t limited to one brain — yours.
These are a few potential money problems to watch out for, but there are certainly others, too. Will you manage to avoid them all? Well, probably not, but it pays to approach money management with as much caution as you would anything else that has the potential to devastate your small business.