Common Mistakes When Managing Finances

Understanding and managing finances is an essential part of owning and running a successful business. However, it can be one of the most challenging things, even for the most seasoned business owner. Finances seen through the lens of only a Profit and Loss Statement, is not the whole picture. There needs to be balanced books, expense reports and a way of looking at all of the pieces together to get a clear picture of what is profitable.

The Green Executive® understands how to help you navigate all of this in your business. Which is why we are sharing the common mistakes business owners make when managing their finances – so you can avoid them.

Not Separating Personal and Business Finances

This is the most common mistake a business owner makes early in their business. Not separating personal and business finances leads to confusion, mistakes, and even legal issues. In order to avoid this mistake, open a separate bank account and credit card for the business and keep all business-related transactions separate from personal finances.

Using a personal credit card for both personal and business expenses can make it difficult to track which expenses are for the business and which are for personal. This type of confusion leads to issues during tax filing season. A business could miss out on HST deductions because their unable to separate personal and business expenses.

Not Keeping Accurate (or Up-To-Date) Records:

Keeping accurate, up-to-date records is critical to managing business finances effectively. Not doing so leads to mistakes in tax filings, missed deductions, and even audits. To reduce this risk, keep track of all income and expenses and store records in an organized and secure manner.

Bookkeeping Tip: Use Quickbooks Online to sync all bank accounts and keep a clear picture of money coming in and out. By adding your business bank account to QuickBooks Online, your account balances and transactions will automatically update in the software — no manual uploading or data entry required. QuickBooks supports over 20,000 local and international banks, so getting set up should be a breeze.

Failing to Plan for Taxes

Failing to plan for taxes can result in unexpected tax bills and penalties. Set aside money for taxes regularly and stay up-to-date on tax obligations. It could be helpful to work with an accountant to ensure the business is on track.

Profit First Tip: Set up a bank account and start putting just 1% of your income in it each week for taxes. We recommend doing the same for Profit, so let’s do it for taxes too! To learn more about this concept, take the 1% challenge.

Excessive Spending

Excessive spending is a mistake that can lead to cash flow issues and/or even bankruptcy. Its a common mistake seen early on in a business and can ultimately lead to failure. By creating a budget and sticking to it, this can be avoided. Track expenses regularly and adjust spending where needed.

Not Seeking Professional Help Soon Enough:

Early on in the business, owners try to manage their finances without seeking professional help. This is a common mistake as accountants and/or bookkeepers are there to help businesses manage finances more efficiently, – saving the business time and money in the long run. Seeking support is not a sign of not understanding financials, it’s a sign of trying to understand them better in order to grow the business.

See how The Green Executive® can help you with your bookkeeping needs by clicking here.

Managing finances is crucial to the success of any business. When a business makes these common mistakes then it has a slim chance of success. [18.4% of businesses fail in the first year.] However, by avoiding these common mistakes, it can thrive and scale successfully.

The Green Executive® understands what it takes to run a successful lawn care and landscape business. With 30 years experience in the industry, we are here to help you understand your financials through bookkeeping services and the Profit First methodology. Contact us today and let us help you stop making these common mistakes.