Written by: Lori Nadglowski
Making financial mistakes in your company could cost you in a big way, it could cripple or tank your business. If your mistakes are serious enough, you can be facing a lawsuit, which could jeopardize your company’s cash flow and income. But if you have the right tools in hand, you can make well-informed decisions that could keep your company thriving.
Here are some of the financial mistakes made by entrepreneurs:
Hiring the Wrong Attorney
An attorney is essential when drafting the agreement that outlines how important decisions will be handled in the business. And when choosing an attorney, make sure they understand your industry, the structure and how the company is valued. The more comprehensive the agreement the less likely there will be disputes in the future.
Mixing Business and Personal Expenses
Do you keep one bank account for both business and personal expenses? Apps like Quickbooks Self-Employed help you track mileage and separate personal from business expenses resulting in more deductions and fewer taxes.
Not Planning for Uneven Cash Flow
If your business has seasonal or uneven cash flows, you’ll need to determine your annual expenses and set up a separate reserve account. Each month, transfer any excess income into your reserve account to avoid shortfalls in the months your cash flow is less than expenses.
Skipping Saving for Retirement
Many business owners fund their retirement with the sale of the business. However, not all businesses can be sold or if it requires the sale of property, it may take longer to liquidate than expected. Putting aside money for retirement helps provide a cushion just in case things don’t go as planned.
Not Funding a Buy/Sell Agreement
If your plan is to sell your business to a partner or employee in the event of your death, will they have the financial resources to complete the transaction? Funding a Buy/Sell agreement with a life insurance policy can assure “business as usual” and that your survivors will receive payment for the sale of the business.
Having the knowledge to make the right financial decisions for your company is essential and needed. It can seem almost tedious, to stay compliant with all the restrictions and regulations to keep your business going. Join me at the Focus on Entrepreneurs Conference on April 27-28 at Wyndham Grand Resort in Clearwater Beach, FL to hear more ways to avoid some of the common financial mistakes made by entrepreneurs.