Few endeavors are quite as rewarding and challenging as owning a business. There are so many unexpected highs and lows, but what often sets business owners back are the financials. It’s no secret that owning a business can do a number on your expenses, and those little missteps can quickly add up. Keep an eye out for these financial pitfalls for business owners and you should be in the clear.
Have cash reserves handy
When you’re starting your business, you may have grandiose dreams of how soon you’ll be rolling in the dough. Unfortunately, it’s going to take a lot of hard work and time to get there. The last thing you want is to immediately go in the red. Opening a business is expensive, after all, and you will most likely have a negative cash flow at first. That’s why it’s so important to have cash reserves on hand, so your business doesn’t immediately sink.
Creating a budget is a must
Alongside that extra bit of cash squirreled away, you’ve got to create a budget. Few financial components of your business are quite as essential as your budget. So, rather than going into the process blind, you’ll want to have a real grasp on where your financials stand. Prepare a budget—this way, you won’t accidentally overspend or think you’ve got more cash on hand than you actually do. Improper budgeting is one of the biggest financial pitfalls for business owners, so be sure to take care of it ASAP.
Keep an eye out for embezzlement
While none of us want to think about this possibility, embezzlement is a real threat to many businesses. You cannot guarantee every one of your employees will have integrity and honesty. As such, if your business is turning quite the profit, they may feel tempted to siphon some of that money for themselves. You never want to turn a blind eye to issues like these. Instead, keep a steady eye on your finances, and if anything seems fishy or out of place, immediately investigate it.
Separate your business and personal finances
As the owner of a business, your work may feel like your entire life. No matter how much it encroaches on your personal life, however, you must keep your business and personal finances separate. Even if it seems easier to transfer your business income to your personal account, or to pay a business expense with your own money, avoid those urges. It’s essential to keep your finances separate so you don’t run into any roadblocks down the line.
