All business owners make mistakes. It is an unfortunate truth. After all, we’re only human! In certain industries, these mistakes can lead to serious consequences. It is the job of any good business owner to identify what these possible errors are, and avoid making them. Luckily, we have seen them all. Accountants and bookkeepers are very familiar with both extremes of running a business. We see everything from the totally unprepared, to the utterly flawless. In the midst of all of this, we have learned a thing or two.
Who You Gonna Call?
One of the most costly errors a business owner can make is overconfidence. Starting a business requires a great deal of dedication and knowledge. However, no one person is expected to know the intricacies of each aspect of business ownership. The wisest man knows that he knows not. It is important to swallow your pride (and cough up a few dollars) sometimes, and let someone who is trained handle the task. Every bookkeeper will tell you, starting new books isn’t difficult, but fixing old ones can be a nightmare. Hiring a subcontractor may seem like a major expense, but it is nothing compared to the damage control you will have to do if things go poorly doing it yourself.
It’s Nothing Personal, Just Business
This cliche line has probably been uttered in a hundred different movies, but actually holds some merit. Something we see a lot, especially with new business owners, is that they often use their own personal funds to bolster their company. Owner investments are fine, they are a must. However, when it comes to using company money, things get a bit more complicated. Unfortunately, many business owners will use a company card for personal reasons, in lieu of taking draws.
This is costly for a couple reasons. First, it takes more time for your bookkeeper to sift through the transactions to find what is actually a business expense. Secondly, many say to themselves “I will pay it back”, and never do. Companies have been drained this way. Lastly, this sort of behavior, if paired with improper bookkeeping and poor records, can be a red flag for the IRS. And no one wants to audited. Business card. Personal card. Have two, keep them separate.
Cash Is King
This one may seem obvious. The saying has been around for a while, yet people seem to forget it. There are so many ways to pay for goods and services now, that we often forget we need to have cash in the bank to back it all up with. In my bookkeeping years, I have seen companies pay thousands a year in bank overdraw fees. I have seen companies unable to make payroll because there are insufficient funds. I have seen owners buy things they don’t need, and spend far too long paying for it. The unfortunate truth is that many businesses operate at a loss for a while before they can start making money. However, you are only making money if it goes into the bank.
Let’s be honest, we aren’t as organized as we should be. Sometimes, we get lazy, and don’t put something back where we found it. This happens in business as well. We start off with the best intentions, and follow all the protocols, but after time complacency usually gets the best of us. Unfortunately, in the business world, this type of behavior can seriously hurt a company. It may start innocently enough, with little consequence, but over time it will bleed into the day-to-day functions, and efficiency of your work. Don’t let messy books, or a messy work space bring you down.
I know what you’re thinking, “That’s all common sense! Why would you make a post about that?” Well, when the number of times seeing these mistakes becomes too high to count, then maybe it’s time to address them. These are all easily solvable mistakes. Better than fixing them, is never making them at all. Hopefully this friendly reminder from your local accountants will help prevent them in the future!