7 Horrible Money Mistakes You’re Making With your Small Business
Every entrepreneur who wants to start a business needs to be confident, strong, reliable, visionary and must also believe in the product or service that is offering.However, not always is easy to start a business, especially in countries like the US where there are so many ideas, competitors and products, that is easy to lose your way along the path. Moreover, you must also be aware of finances, ideas, opportunities and save money where you can to get you on track.
In this article, we will approach some of the most common small business mistakes when it comes to money. You will learn some good ideas or solutions to these problems and you will maximize the profits of your business.
Mistake #1: Mixing personal with business accounts for the entrepreneur
It is a common mistake when you are in the early stages of your business to mix your expenses related to business with personal accounts. This generally occurs when the entrepreneur needs some basic ground funding to get the commercial business on track.
However, turning this into a habit could lead to losses and errors in the future.
For instance, when you use your personal account to pay for equipment, you are losing two points of view.
The first one of them is that you lose control of what you are spending on your business, this does not allow you to see clearly factors like the revenues, expenses, and profits that you are making.
The second point is related to taxes! The tax treatment for businesses is much lighter than what it is for the residential sector, therefore, if you pay equipment using your personal account, you need to pay it on your tax report! That is one of the worst small business mistakes that could cost you a lot of money.
To avoid this problem, open a business account as soon as possible and separate company expenses from personal ones.
Mistake #2: Requesting large loans
One of the common small energy mistakes is that to get your business started, you need a great amount of money and that the best way to do obtain it is to request a loan.
Getting a debt of 70,000 USD when you still haven’t developed a good market for your product or service is a very bad idea. You may come up with a deadline that could become a problem if you haven’t structured a good business plan yet.
Moreover, if you get started with such amount of money, you might not optimize your expenses as much as you would if you didn’t have it.
In this case, the best is to get started with a reasonable amount of money without acquiring any debts while you develop your business strategy. Make strategic alliances, understand your competition, find clients and make a market for your business.
Mistake #3: Don’t forget your taxes!
If your small business is making revenues, it is widely attractive and good for business!
However, as an owner, you must never forget that at the end of every fiscal year, you need to pay taxes, and as you know, there is no credit card for that. Therefore, you must consider that in your balance sheet you must always save 10-20% of your profits in cash to be able to pay at the end of the year with no problems.
Mistake #4: Not choosing the right source of energy
If you already got your business running and you are located in the US, you will realize that one of the most important expenses in every business is related to electricity, especially if you need industrial machines.
Currently, the trends towards a more sustainable world have developed renewable energy sources at such level that they are already competitive with fossil fuel sources in electricity generation. Two of these clean energy sources are actually even cheaper than traditional sources of electricity like gas, coal or even nuclear energy. We are referring to wind and solar energy at grid-scale.
Prices vary from State to State, but basically, you need to make a research about the best energy supplier for small business that is located in the surrounding areas, to select the one that offers cheap gas and electricity for small business.
Mistake #5: Not using the sun to your advantage
One of the best ways to save expenses in energy for your small business is to use the Sun’s radiation to your advantage.
The Sun, as a heating source on the planet, can be used to reduce your monthly electricity bill as well. Choose to close the drapes when you are in the middle of the summer season, this will avoid any excess heat from entering inside your local office. In the same way, choose to open them when you are in the middle of the winter season, your heater will have to work less to get the desired temperature inside a room.
Mistake #6: Not understanding energy prices seasons
An important detail for any small business that has machinery running to develop products or that has another industrial purpose is to understand when is the time to save most.
Energy prices are always related to the seasons. During summer and winter, the demand for electricity tends to be higher due to all the air conditioning and heaters that are turned on in the residential sector, but also in the commercial sector as well.
Therefore, many small businesses with industrial machines tend to go into the market during the spring and fall seasons. In these periods, you will see a shorter energy bill at the end of the month while the business gets started. If you already have your business on the market, then with this fact you know that you need to optimize energy consumption, especially during winter and summer seasons.
One of the biggest small business mistakes is to forget about energy efficiency in your local offices.
Not choosing the right equipment for electrical appliances, but also for any other machinery that does not perform in the most efficient way, is a factor that can represent much money over time.
HVAC systems are actually one of the most important electrical loads in any local office. If they do not work accurately or there are any leakages in the system, this can represent very important losses in energy on the long-term.
The best solution to this problem is to request an energy audit to reliable companies such as the Phoenix Energy Group. You will learn more about how your electrical appliances, know if the energy systems are performing as they should and if there are any upgrades that could be approached to improve the energy efficiency of your small business to reduce energy costs as well.