Growing your business can be a daunting task that can either make or break your future aspirations. Coming up with a brilliant idea was easy enough, but not everyone knows how to successfully materialize their plans. Whether you’re a start-up or an established business that is looking to grow, Provident Payments understands the need for smart financial decisions early on. You’ll want to keep an eye out for these mistakes to avoid when growing your business.
Avoid Mixing Your Personal Finances With Your Business
When you’re a freelancer or a sole proprietor, mixing your personal money with your business money can be easy to do. You spend your own money on software and other business expenses and just pay yourself back when your clients pay you, right? Wrong. This only works on a small scale and it can quickly become very confusing to differentiate on how much you’re spending on your business. Not only is it confusing, but it is also a very inefficient way to operate. You’ll have a hard time saving up personal funds.
If that alone isn’t enough to convince you to go set up a second bank account for work, if you establish an LLC to protect yourself legally, you may be exposing yourself by spending corporate money on personal expenses.
Instead, go out and set up a bank account, An employer identification number (EIN), and establish a line of credit such as a business credit card. This is the best practice to keep your personal finances and business finances separate and neatly organized.
Need a better way to process payments for your business? Provident Payments is here to help.
Racking Up Too Much Debt Early On
As we mentioned, establishing a line of credit for your business is good practice and a good idea. It can help you purchase supplies, software, hardware, and inventory to start your business. Having credit at your disposal can really get you off the ground.
The issue arises when your company goes too far into debt early on and you now you have to dig yourself out of a hole. Racking up a lot of debt and maxing out your credit cards can prevent you from getting a loan with good terms (or at all) because your debt usage will be too high. You will also have to pay interest and penalties. This can stunt your cashflow.
There are right and wrong ways to use credit. If you aren’t sure when to use credit and when to use the cash that your company is bringing in you can always look into hiring an accountant or seeking out a financial mentor.
Not Having a Financial Planner
While we’re on the topic, not having a financial planner, advisor, accountant — whatever you want to call them — on your side can be a critical mistake that will stunt your business’ growth. Accountants can offer a lot of insight that you may not have when it comes to starting a business. Where can you cut costs, when should you use financing, can you handle bringing on more hires? These are all questions that an accountant or a financial planner can help you understand.
That brings us to our next point:
Hiring another member of your team can be incredibly useful. The right person can help carry some of the weight of running the business. The problem is that you want to make sure that you are in a position to employ them for an extended period of time. You need to be able to pay their salary and pay for any extra equipment, computers, training, or office space that they will need. The last thing you want to do is overhire a person and unintentionally burn the bridge when you realize that it isn’t sustainable yet.
Not Updating Your Business Plan As You Go
When you started your business, you probably wrote a business plan and never looked at it again. When you are growing you business, it’s important to look at your business plan and change it. Things change, life happens, and with it so do goals and procedures. Make sure that your business plan is always up to date to ensure that your company can grow with you.