We all make mistakes with our money. Even as business owners, it’s possible to make money mistakes that can add up to a big difference in your profits. Before you get too far into your business, look around at some of the things you might be doing that lead to money mistakes.
As you move forward with your small business, here are 5 money mistakes to try to avoid:
1. Spending Too Much to Start Up
When you first start a business, it’s tempting to think that you need just about everything. You want to buy all your equipment and it’s tempting to buy extras to make your office cool.
However, there is a good chance that a lot of the things you buy as a startup are not necessary. Instead of spending a lot of money up front, look for ways to save money. Sometimes this means waiting to make certain purchases until you have the available capital. No matter how much you got it for a business loan or startup capital, you need it to be careful about how you spend.
2. Missing Tax Deductions
Some business owners don’t think it’s worth it to save receipts and claim deductions for small expenses. However, over time those small expenditures can add up. A few bucks here and there may not seem like a lot, but over time it can make a difference.
It’s not just expenses, either. You might miss tax deductions and credits available for hiring certain people or providing certain benefits. Make sure to review your expenses each year and save your receipts so that you can take the tax benefits to which you are entitled.
3. Lack of a Cash Cushion
Many business owners understand that they may operate on a shoestring for quite some time. However, this can lead to one of the biggest money mistakes, which is to neglect building a cash cushion.
Your business needs some sort of savings back up so you can keep in business even when things are tough. You should also try to get some sort of line of credit or financing that can help you maintain that liquidity so your most important expenses can be met.
Don’t forget to build a personal emergency fund as well so that your personal finances can make it through tough business times.
4. Too Much Too Soon
When you first see some success with your business it is tempting to immediately branch out into something new. However, this can be one of the major money mistakes entrepreneurs make. You might want to launch a new product or provide a new service once you see how successful your original idea can be. Unfortunately, branching out too soon can be costly. Make sure you are solid before you diversify into new offerings.
5. Being Busy Instead of Productive
Sometimes we wear our “busy-ness” like a badge of honor. However, we often don’t stop to think about whether we are really accomplishing something. It’s also common for business owners to get bogged down in mundane tasks. This is can cost you money in the long run.
Instead of trying to look busy or feeling like you have to do everything, make it a point to delegate. Focus on the most important tasks that will provide you with better profits. You will waste less money and be more successful over time.