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Top Financial Mistakes Made By Business Owners

  • Highlights

  • Not having separate personal and business accounts

  • Immediately making big purchases for the business

  • Not setting a clear budget

  • Not planning your taxes in advance

To run a successful business, it takes hard work, ideas, and an ability to take calculated risks. You may make mistakes along the way as well, and while some are easy to correct, there are others that may just end your dream.

This is especially true of mistakes related to your finances and how you handle your business loans. If you do not manage them properly, they can dry up your cash flow, and put you into bankruptcy before you’ve achieved anything. Here are a few financial mistakes to watch out for:

1. Not Having Separate Personal and Business Accounts

Separating your personal and professional accounts is extremely important. You have to do this before you start collecting revenue, so that it’s easier to do the accounting for your business, plan for tax estimates, and set your budget. Moreover, you will also have a better idea of your business’s cash flow when you separate the two accounts.

2. Immediately Making Big Purchases for The Business

While it’s good to dream big and want all the best-in-class equipment for your company, it’s equally important to follow a budget. Ask yourself, if the item you want to purchase will generate any revenue in the short term. A website, a building, or attending an industry trade show may be required when you are starting off, but things like luxurious office parties and team-building trips can wait until later.

3. Making Large Personal Purchases

Don’t make a large personal purchase, like a car or a house, with a loan you hope to repay by generating revenue through your business. Additionally, even if you’re going to pay for it from your savings/ or another personal account, it’s always better to wait before you make such a purchase. This is because your personal savings may be required to finance a business need in an unexpected situation.

How To Get Small Business Finance From Bajaj Finserv

Financial Habits Business Owners should have

As a small business owner, you need to stay on top of your business’s finances, in order to ensure that your business keeps running smoothly and never runs out of working capital for its day-to-day operations. Additionally, you need to ensure that you are able to obtain external financing for your business when the time comes for your business to grow, or take on a large project. Here, we give you a few financial habits that every small business owner should have, to ensure the success of their enterprise.

4. Not Setting A Clear Budget

You have to know what you can afford to spend each month, so that you can allot your resources accordingly. Else, you won’t be able to run your business for very long. It is important that you do not burn a hole in your pocket for marketing, operational, and other expenses.

5. Not Planning Your Taxes

It is also important to plan your taxes in advance, so that you do not have a massive tax bill at the end of the year. Different types of businesses have different tax obligations, and calculating them takes time and effort. Hence, doing it in advance is a good idea.

6. Trying to Do It All Yourself

You may be a capable individual, but there is a limit to what you can do. You have a set of skills and doing anything beyond that may harm your business more than help it. So identify your skills, and surround yourself with people who are capable where you are not. This will help you build a great business.

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