Money can be the boon or bane of any business, depending on how the owner handles it. From the moment you start banking to manage the business’s funds, you are already open to a slew of mistakes. Many entrepreneurs have gone bankrupt simply because they failed to manage their cash well. Naturally, you’d want to avoid that, so here are some common mistakes to avoid.
Reliance on Credit
Almost all businesses incur credit to sustain their operations – and that’s fine. The problem is when you rely too much on credit. What if the bank you deal with reduces, or worse, cuts your credit line entirely?
This happened to many businesses, and even though it’s rare, you wouldn’t want to be caught unprepared. Try as much as you can to find sources of cash other than bank credit. More importantly, make sure you get the best deals on cash management services.
Disorganized Bank Statements
Money within small businesses can come from many avenues. There might be many bank accounts related to the business. This is a bad practice, as you might fail to compute your finances accurately.
The best move is to reconcile everything, preferably in a single account. This helps you streamline all the finances of the business, making it easier to file taxes and make cash flow projections. Venture Bank recommends finding a flexible banking plan that suits your business.
Lack of Correspondence with the IRS
Speaking of taxes, be sure to correspond with the IRS properly. Keep an updated record of the transactions you have with the agency. This helps you in case the IRS finds an anomalous transaction or an alleged case of tax evasion. Make the most of the deductions you can get, but file everything properly.
Managing your money is the first thing to master when running a start-up. Be aware of these common mistakes so you can avoid the errors many aspiring business tycoons committed in the past.