Columbus County Small Business Owners: Don't Make These Dangerous Financial Mistakes
Anyone who's ever started a small business knows that it's not an easy feat. In addition to the endless to-do list and juggling act that is maintaining a business, there's also the financial side of things to consider. From budgeting to invoicing to hiring, there are a lot of potential mistakes that can be made — and those mistakes can be costly.
In this article, the Columbus Chamber of Commerce explores a handful of the most common financial mistakes small business owners make and how to avoid them. By steering clear of these pitfalls, you can set your business up for long-term success.
Poor Budgeting Practices
One of the most common financial mistakes small business owners make is failing to properly budget for their business expenses. Without a budget in place, it's all too easy to overspend and find yourself in a precarious financial situation.
To avoid this mistake, take the time to sit down and map out all of your anticipated expenses for the upcoming year. This includes everything from office rent and supplies to marketing costs and employee salaries. Once you have a good idea of what your expenses will be, you can start working on creating a realistic budget that will help keep your spending in check.
According to Take It Personelly, another mistake that small business owners often make is being inefficient with their invoicing. This can range from not sending invoices out in a timely manner to not keeping accurate records of what was billed and when payments are due. This can result in late payments, missed payments, and a lot of frustration on both sides.
To stay in the black, set up a system for tracking invoices from the moment they're sent out until they're paid in full. This might mean using accounting software or simply creating a spreadsheet where you can record key details like the invoice number, date sent, date due, and payment status. By staying on top of your invoicing, you can minimize late payments and keep your cash flow healthy.
Bad Inventory Management
If you sell physical products, then proper inventory management is essential to keeping your business running smoothly — and avoiding any costly mistakes. Some common errors include over ordering inventory, not tracking inventory levels accurately, and failing to properly forecast future inventory needs. These mistakes can lead to wasted money, frustrated customers, and disruptions in your supply chain.
To avoid these problems, put systems in place to help you track your inventory levels closely and stay on top of reordering needs. You might also want to consider investing in inventory management software, which can automate many of these tasks for you and make it easier to keep track of everything. By being proactive about managing your inventory, you can save yourself a lot of headaches (and money) down the road.
Mixing Financial Accounts
One mistake that small business owners often make is mixing their personal finances with their business finances. This can create a host of problems, including making it difficult to track expenses and income, complicating tax filings, and putting your personal assets at risk if your business runs into financial trouble.
Rather than combine accounts, open up separate bank accounts for your business and personal finances — never mix the two. You should also have separate credit cards for business expenses so that you can easily track what is being spent (and write it off come tax time). Keeping your finances separate may require some extra effort upfront, but it will pay off in the long run by preventing any unnecessary complications down the road.
Set Up an LLC
The business structure you choose can also affect how intertwined your business and personal finances are. An LLC, or limited liability company, is a great choice for more thorough separation because as its name implies, it provides limited liability coverage. What does that mean? It means that your personal assets will not be in danger if your business experiences financial struggles. Do you research on getting a North Carolina LLC before deciding for sure if it’s the right option for you.
Establish Healthy Financial Procedures
By avoiding these common financial mistakes, you'll set your small business up for long-term success. While there's no one-size-fits-all solution when it comes to managing your finances, taking the time to establish solid systems and procedures will go a long way toward keeping your business on track and ensuring its financial health for years to come.
Are you a business owner in Columbus County? Join the Columbus Chamber of Commerce for invaluable resources and relationships that will help your company grow!
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