Financial Mistakes Wylie Small Business Owners Should Avoid at All Costs
Did you know that 82% of small businesses fail because of poor financial management? As a small business owner, it's crucial that you avoid making any financial mistakes that could jeopardize the health of your company. From poor budgeting to inefficient invoicing to hiring the wrong people, there are a number of pitfalls that can trip you up. In this article, the Wylie Chamber of Commerce explores seven of the most common financial mistakes small business owners make — and how you can avoid them.
1. Improperly Budgeting
One of the most common financial mistakes small business owners make is failing to create and stick to a budget. Without a budget in place, it's easy to overspend and put your business in a precarious financial position. Be sure to take the time to create a detailed budget for your business, and make sure you stick to it as closely as possible.
2. Poor Invoicing
Another common mistake small businesses make is inefficient invoicing. If your invoices are inaccurate or slow to arrive, it can put a strain on your cash flow and make it difficult to keep track of what's owed to you. Invest in invoicing software that makes it easy to generate accurate invoices and get them out in a timely manner.
3. Ineffective Inventory Management
If you don't manage your inventory properly, it can lead to a number of problems, including wasted money on excess inventory, lost sales due to stockouts, and frustrated customers who can't find the products they're looking for. Make sure you put systems in place to help you keep track of your inventory levels and reorder products as needed.
4. Combining Business and Personal Finances
Mixing business and personal finances is a recipe for disaster. Not only does it make it difficult to track expenses and stay organized, but it can also lead to problems if your business is ever audited by the IRS. To avoid these issues, open separate bank accounts for your business and personal finances, and always keep records of all expenses.
5. Having Excessive Debt
Carrying too much debt is one of the quickest ways to sink your small business. Not only does debt put a strain on your cash flow, but it also increases your risk of defaulting on loans or missing credit card payments, both of which can damage your credit score. To avoid this mistake, be mindful of how much debt you're taking on and only borrow what you can afford to repay easily.
6. Choosing a Designation that Doesn't Benefit Your Business
If you're not careful about choosing the right legal structure for your business, you could be putting yourself at risk financially. For example, if you choose not to designate your business as an LLC, you could be held personally liable for any debts or losses incurred by the company, meaning your personal assets could be at risk if something goes wrong. To avoid this mistake, consult with an attorney or accountant who can help you decide if an LLC in Texas is the right designation for your business.
7. Hiring the Wrong Staff Members
One of the biggest financial mistakes small businesses make is hiring the wrong people — either people who are unqualified or those who are poorly suited for the job at hand. Not only does this result in subpar work being done, but it also means wasted time and money spent on training and onboarding employees who ultimately don't work out. Rather than rush the recruiting process, take your time when hiring new employees, and be sure to screen candidates thoroughly before extending an offer.
Budget, Strategize, and Succeed
Avoiding financial mistakes is crucial for any small business owner who wants to ensure the long-term success of their company. You want to be intentional and strategic about all of your choices, from choosing your business structure to setting up invoicing software and hiring new staff members. By being aware of these potential mistakes and taking steps to avoid them, you'll put yourself in a much better position to succeed financially as a small business owner.
The Wylie Chamber of Commerce is devoted to helping local entrepreneurs find success in their business ventures. Join us today!