If you have your own business, you obviously want it to be financially successful. I've been in the accounting and auditing world for more than 10 years and have seen my fair share of businesses fail.
Businesses can fail because of simple mistakes or they can be more complex mistakes.
Let's look at the biggest money mistakes that are made in businesses that I have seen over the years. You may or may not be making these mistakes.
But now is the time to change these mistakes into learning lessons and start making your business more financially successful.
Do Your Bookkeeping Regularly
One of the main reasons that small businesses fail is because no one pays attention to the money.
There are 2 parts to money in your business - the money you bring in and the money you put out.
When I see the online entrepreneurs in the groups that I frequent on Facebook, they are really only tracking one metric - their money in.
But if you are paying attention to both sides of the money equation, aka doing your business bookkeeping, then you'll see where there could be issues popping up.
You should be doing your bookkeeping at least weekly, but I personally prefer daily.
But whatever you, don't wait until the end of the year to do a full year's worth of bookkeeping!
If you don't have the time, patience or knowledge to do your own bookkeeping, then hire a bookkeeper to do it for you.
Look at your monthly P&L
Right along with doing your bookkeeping on a regular basis, comes looking at your monthly P&L statement.
This statement compares the money you bring in against the money you spend to give you the monthly profit.
You should be looking at this statement on both a monthly basis and a year to date basis.
At the end of the year, you'll be taxed on the profits. By looking at the year to date basis on a regular basis, you can estimate how much you'll pay at the end of the year in taxes, and do some tax planning by saving the money that you need to save to pay your tax bill.
But this statement will also tell you where you are spending money in your business. You can analyze whether you are spending money efficiently and if it's actually helping you to grow your business.
Just don't be like the one client I used to have, who ended up telling me after a year of working together, she never looked at the reports. She never looked at the reports because the amount of money she was spending in her business actually scared her.
She made really good money in her business too. But spent every single penny of it. (And from my observations as an outsider, it didn't look like she was willing to spend any less money.)
When you actually look at your monthly reports, you can change behaviors that you know are a problem.
When you ignore the monthly reports, you are going to continue spending money that you most likely don't even need to spend in your business.
Plus, you'll find services you are paying for and not even using. You'll find that you are buying courses that you aren't even using.
Analyze what works and doesn't work in your business on a regular basis. And the easiest way to analyze this, is by looking at your monthly P&L and see where you are spending money you don't need to be spending. You will also be able to see what products and services are making you the most amount of money to help you keep growing your business.
Create a business budget
I rarely ever see many entrepreneurs, online or offline, create a budget anymore.
Budgeting isn't just for your personal money. Your business needs a budget too.
Just like in the point above, analyzing your P&L, you need to set a budget so that you know how much money you need to make in your business just to pay your minimum bills in your business.
Then after your minimum bills are paid, you can spend money on other things to grow your business.
When you don't have a budget in place in your business, then it's not always easy to know this information.
You can't always make decisions about spending money based on the amount of money in your bank account.
Plus your budget will help you keep an eye on those pesky automatic payments that come through every month (or year) that you tend to forget about. (Hello Tailwind! I'd like a reminder email about the upcoming payment you are going to deduct!)
Create a profit plan
You have to create your business budget before you work on your profit plan because your profit plan needs to know how much money you need to make in your business.
When you know how much money you need to make to pay your minimum amount of bills, then you start to plan out what you need to sell in your business to start making a profit (revenue minus expenses equals profit and the breakeven point is the amount of revenue you need to make in order to have a zero balance between revenue and expenses).
The profit plan will take you through your business's annual cycle of what you are going to sell when in your business.
When you have a profit plan in place, you can easily plan out your marketing strategy too.
The money piece is only the first piece of the puzzle that helps you grow your business. Get the money piece functioning properly and you'll start making your business into a profit machine!
Build an effective profit plan in your business that will not only help you meet your income goals, but surpass them too.
This workshop gives you the tools and know-how to build an effective profit plan in your business.
Plan out your own pay
Most of the time, entrepreneurs do not plan out how much they are going to pay themselves.
They just take the money that is left over after the bills are paid. Or they take money out of the business when they have bills to pay for their personal lives.
You really should have a salary for yourself in your business. You can always pay yourself more or less. But when you have a salary set and you pay yourself on a regular basis, then you don't have to take money from your business when your business needs to invest in a service to help you learn something new in your business.
Plus when you pay yourself a salary and pay yourself on a regular basis, then the government will see that your business is your job and you are making a real salary with your business.
And for those of you who need to prove to your family and friends that your business is a real job, by getting a regular salary, you are doing just that.
Hire the Right Help
There are so many people out there who claim they want to help you in your business.
You have new bookkeepers and virtual assistants popping up every day. It could be an easy way to make money when you need to make more money to pay the bills, right?
Well, when you want to grow your business, you need to make sure that you hire the right help in your business so that they actually help you grow yours.
Find out what type of education the people you are looking to hire have. What experience do they have. How can they help you grow your business.
My biggest pet peeve is the people who think they can do bookkeeping for businesses, but yet have none to very little accounting knowledge. These people will end up costing you more in your business than if you suffered through doing the job yourself.
Just because someone wants to make money online to pay their bills, doesn't mean they are qualified to do the job properly.
When you hire the right help in your business, you are finding people that can actually help you grow your business and end up giving you even more time to do the things you really need to do to grow your business.
Pay estimated taxes
Not everyone that should be paying estimated taxes actually pays them. The main reason they don't pay them is because of lack of knowledge.
I had someone reach out to me not too long ago to ask about paying estimated taxes. She had been in business for 2 years and didn't even know what estimated taxes were or if she should be paying them.
When you pay your estimated taxes on a quarterly basis like you should, then when it comes to tax time, you have a much smaller bill due and it takes the stress away from having to pay a huge tax bill.
Plus you also reduce the amount of penalty you have to pay for not paying estimated taxes. (Yes you will be charged penalties for not paying your estimated taxes.)
Your estimated taxes should be paid on a quarterly basis (the 15th of the month after the quarter is over: April 15, July 15, October 15, January 15).
I always recommend that you save 20-30% of the money that you bring into your business and then use that to make your quarterly payment.
Yes, you will get a refund if you happen to overpay on your estimated taxes.
Make automatic transfers to your savings
I just mentioned that you should save 20-30% of the money that you bring in for your estimated taxes. If you can, you should make these into an automatic transfer to your savings account.
But you should also have other money transferred to your savings account for your business too.
Many entrepreneurs talk about having a dry spell or the feast or famine in their business.
So what happens when you have a month that you can't pay your business bills? What are you going to do?
You should have money in a savings account to cover several months of bills (a business emergency fund of sorts) in the event that something like this (or worse) happens.
By transferring money to your savings automatically, just like in your personal life when you do this, you don't even notice the money was even available.
Finally take your taxes from frustration, chaos and confusion to calm and organized.
Learn everything you need to know to master your business finances and taxes explained in plain English.
Give up FOMO
In the business world (or even this consumer's world we live in), FOMO is a very real thing. We always think we are going to miss out on something if we don't buy it right this very second.
Yes, I get FOMO too. I've bought way too many courses for my business and there are still times when I feel like I'm missing out if I don't buy a certain product.
And I'm sure you feel this way too.
Especially when someone says they have no idea when they are going to offer the course again. Or the price is going up tomorrow.
But do you really need this course or service that you are going to buy? Are you going to complete the course? Or is it just going to sit on your computer collecting dust like the rest of the ones you've bought?
FOMO is the biggest culprit of spending too much money. Or even spending money we don't have.
But when you realize that you already have everything you need and can actually save the money that you were going to spend on that course for something that you actually do need, you'll be on your way to a more financially successful business.
Where can your money be used more efficiently in your business for something else? And what are you really missing by not buying that course this time around (or at all)?
The Biggest Money Mistakes that are Holding Your Business Back From Financial Success
When you correct these mistakes in your business, you'll be well on your way to a financially successful business.
And you won't have to worry as much about your business becoming one of the statistics of failure.
Plus, you'll end up making even more money to be able to pay yourself even more money too.
Which of these money mistakes are you making in your business? What are you going to do to fix them?