Financial Errors that Could Kill Your Business
Running a business is… well, it’s expensive business. It can put you in great financial standing, but there are common mistakes that could do the precise opposite. This will harm both you and the business. These sorts of mistakes need to be avoided from the get-go, so it’s essential that you learn about these potential pitfalls as soon as possible.
Credit card frenzies
During the early days of your business, you need to put up a lot of money. You can read more about these costs at the SBA website. Many business owners forget just how much they need to put into the average startup; remember that it’s likely you won’t see any returns on your investments for perhaps a year or two – sometimes longer. With this in mind, as well as the need to have some sort of cash reserve, many budding entrepreneurs will come to rely on credit cards. But be very careful when you choose this method – high annual fees and exorbitant interest charges can get you into tremendous and damaging debt. Speaking of which…
Ignoring debt
The chances are high that you’re going to get into some form of debt when you’re developing a business. This is okay; it’s par for the course in this arena, and good accountants near Austin or wherever you are located should be able to tell you when cash flow is starting to take a dip. It’s only going to work against you in any profound way if you’re not ready to deal with it. While debt isn’t exactly the most fun thing to have on your plate, you shouldn’t make the mistake of simply not dealing with it – which is a mistake a surprising amount of business owners make. If you’re feeling a little overwhelmed by several business debts, then perhaps you should visit Inc for advice on debt consolidation. Tackle debt head-on; it won’t just go away!
Overestimating your limits
It can be tough to tell when you’re in over your head, let alone admit it. This is why you should put a focus on risk tolerance when you’re in the planning stages of your business. It’s best to know how far you’re going to be able to go into the red before you stand no real chance of going back into the black. If you find yourself in this position, then consider working with a bankruptcy lawyer from IRB Law instead of pushing ahead regardless. This can make your problems even worse. Of course, it’s best if you don’t find yourself in that position at all, so make sure you know your financial limits!
Not paying yourself
It seems prudent – even noble – to put all the money you make from the business right back into the business. Some would say that this is sound financial behavior, probably because they’re only considering one alternative – the eager-beaver businessperson who takes all the profits and blows it all recklessly. But if you’re not paying yourself a healthy salary, this can seriously mess with your personal finances in the eyes of creditors and potential business partners. It will leave you with no evidence that you’re actually making money, which will put you in bad financial standing.
