Common Small Business Owner MistakesSome of these mistakes can mean the difference between a business becoming a success—or one that just doesn’t make it.
1. Going it AloneWhen your business was just starting out, you probably maintained your own books, filed your own tax returns, made your own invoices, answered your own phones and got your own coffee. While this strategy works in the first year of a business, it’s not maintainable much longer than 12 months.From handling your own bookkeeping services to filing your own tax returns, it’s easy to make mistakes and extremely time-consuming to keep up a business’s books—especially when the whole reason you got into your business was to make a great product or service you were passionate about.Though it might be extremely tempting to file your own tax returns come tax season, it’s one of the surefire ways to sink your business. Most small business owners don’t understand complex and sophisticated tax questions that a CPA would be able to decode in a jiffy. Most small business owners also aren’t familiar with all the tax deductions that are eligible to them.Do yourself a favor, and hire an accountant after your first year of business. You’ll spend less time elbow-deep in tax documents and more time interacting with customers, vendors and even your baby itself—the product or service you created.
2. Keeping Your Personal and Business Expenses CombinedMany small business owners do not separate business and personal expenses in the first year of business. This is often because many of these expenses bleed together. You find yourself dishing cash out of your own wallet to buy coffee for your employees, a round of drinks for some investors or even supplies for the office.
Like doing your own accounting and taxes, these habits are relatively normal for the first year of business; after the first year, you should separate your business accounts from your personal accounts. You may still find yourself dipping into your wallet or checking account for cash, but these instances should be monitored and tracked on expense reports.When you look only at the balances, expenses and profits of the business you’re running—and not your personal accounts—you can accurately forecast budgets for the upcoming months, quarters and year. If your personal accounts continue to clog this information, you might inaccurately believe you have more (or less) cash flow.Your taxes can also be affected by inconsistent business books and combined accounts. You may be eligible for tax credits you never knew existed, or you might be responsible for fees to the IRS that you were previously unaware of—and you don’t discover until it’s too late, and you’re buried in fees. Keeping your books separate can save you time and money when it comes to tax season.
“Though it might be extremely tempting to file your own tax returns come tax season, it’s one of the surefire ways to sink your business.”