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Avoid These 5 Common Small Business Money Mistakes

1. Insufficient Cash

When a business fails, insufficient funds are one of the main causes. Some businesses, usually Startups, overestimate how much income they will receive and underestimate how many bills they will be liable to. Be sure you are able to distinguish between cash flow and sales. Avoid cash flow problems by meticulously estimating and be patient in allowing the time it may take for you to get paid. Make sure to "get invoices out on time, stay on top of collectibles, and reassess your cash position at least quarterly, if not more often". 


2. Waiting Too Long to Seek Credit

The time to look for a business loan or get a line of credit is when your business looks sturdy enough to persuade a lender you will have no problem repaying the funds. "Depending what you need, funding sources include traditional banks, online lenders, credit card cash advances or purchases, and specialty lenders." The time to seek funding is when your business looks solid enough to convince a lender you will be able to repay what you borrow. The time to look for a business loan is when your business looks sturdy enough to persuade a lender that you wont have a problem repaying what you are borrowing.



3. Mixing Business and Personal Funds

Mixing business and personal purchase/funds are a huge no. Going back and forth between your business account to make personal purchase and vice versa will be a pain to distinguish when it comes to keeping records, paying taxes and not to mention if the IRS thinks they're smelling something fishy with your accounts. "The IRS believes you have purchased goods or services for personal use and deducted them as business expenses. If you have business partners or investors and mix business and personal expenditures, you'll have even more problems on your hands." Lastly, you'll find it difficult to get a business loan.


4. Not Staying on Top of Recordkeeping

Keep records frequently. Take the time to enter all the data into an accounting program or spreadsheet or hire someone to do the job for you. If you hire someone else manage your business and personal financial records, be sure to go over the work they've done weekly (as frequently as possible, weekly is ideal), "looking to be sure income and expenditures are properly documented and be sure that nothing looks strange". Employee theft is a huge dilemma for small businesses and more often than not the employee who's been there for a while and is very much trusted happens to be the thief. 


5. Under-pricing

Some small business-- more so those who are just starting out will often charge too little. "Sometimes they rationalize that the low price is a way of "getting their foot in the door." Make sure that when you are determining prices to calculate in the labor that you're putting in as well. "If you're just starting out, remember to account for all your costs in figuring out what to charge, and check to see what competitors are charging for what you sell. Don't try to be the lowest price vendor out there. Once you're up and running, reassess your pricing structure at least annually".



Attard, Janet. "5 Common Small Business Money Mistakes". Business Know-How. Web. 2015.

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