Whether your business started out organically or you had an official launch date, one of the many skills you will have to learn, as a new business owner, is how to properly manage the financial side of your business. As with many aspects of your growing business, your finances are best delegated to an expert who knows how to design sustainable business practices.

Incorrectly Doing Your Own Bookkeeping and Accounting

As an entrepreneur, you are eager to learn all aspects of what makes your business tick. While an understanding of your financial plan and monthly PNL are a must, that doesn’t mean that doing your own bookkeeping, accounting, reconciliation, and payroll is in your best interest. In fact, it may even be best to have your accountant assist in making your annual financial plan—and identify the best places to save and spend. Going this alone is where many new businesses fail, because they underestimate the complexities of managing their capital.

Spending Business Finances on Personal Expenses

Whether speaking of your daily café coffee, adding personal items to your office supply order, or taking out a cash withdrawal and failing to track how it is spent, there is also a lot of confusion about what expenses qualify as a deductible. Mismanaging this aspect of your money can lead to some real problems—not to mention that it leaves you with an inaccurate understanding of your expenses. First thing, make sure you have separate banking accounts for your personal finances and each of your businesses—then work with your accountant to learn what expenses and deductions you should be tracking, and even how to pay yourself.

Counting Your Eggs Before They Hatch

It is exciting when the sales start coming in, but you must not mistake your sales as profit. Your first few years of business are the most challenging, and it is important that you create and stay within your budget. When you do begin turning a profit, you must avoid the temptation to spend every penny—and instead be strategic about how it is saved and invested.

We hear all the time how most new businesses fail within their first five years, and the mistakes above are often the key contributing factors. Reach out to NTRC Tax & Finance today to discuss building a sustainable business plan.

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