A Beginner's Guide to Financial Pitfalls for Small Business Owners

Posted By Kalamata Capital LLC || 17-Nov-2015

The success of your business depends on a variety of factors, and savvy financial planning is one of the most important ones. But money management poses a serious challenge for many new business owners. Whether you’re looking to secure capital for your startup or manage cash flow, it’s imperative to pay close attention to your financial plan.

Here are a few tips to help you avoid common pitfalls:

Don’t neglect your savings.

The key to saving is knowing your monthly expenses. Once you understand where your money goes every month, create a realistic savings goal. If you still work a day job, devote a smaller percentage (3% – 5%) to your business savings.

Focus on growing your business, not overinvesting.

You shouldn’t rely on cash reserves, credit cards, and personal savings to start and sustain your business. This means finding the right balance between pouring resources into your business and spending on unnecessary office space, extraneous inventory, or fancy computer systems. In short: invest in necessities and hone your focus on building a good product.

Always keep your personal and business finances separate.

You don’t have to create a separate bank account for your business, but you should avoid mingling your personal and business finances. If a separate bank account is the best way to do this, consider setting one up. There are many reasons to do this, but several important ones are:

  • Mixing personal and business finances can make your business less credible
  • Separating personal and business finances reduces your personal liability
  • You risk tax complications by mingling personal and business finances

You can also guard your tax obligations by creating a separate bank account and automatically depositing a portion of your income into it. When tax season rolls around, you won’t have to worry about footing an unexpected bill.

Always pay yourself a salary.

This may seem obvious, but small business owners often pour profits back into growing their business. This isn’t a sustainable plan. If you fail to maintain your personal finances, you’ll have to mix them with your business finances in the case of a money emergency.

Get the right small business financing.

Your business venture starts with the right funding. Getting started at Kalamata Capital is easy and fast; simply apply online and we’ll personally review your information. Submitting an application is free, so you don’t have to worry about unexpected fees. Get in touch with us today!

Looking to finance your business? Click here to start the process now with the small business financing options at Kalamata Capital.

Categories: Small Business, Tips