Five Common Financial Mistakes Startups Make

Five Common Financial Mistakes Startups Make

There is nothing worse than putting all of your time, energy and money into a new business that fails. Unfortunately, according to the U.S. Small Business Administration, 49 percent of all new businesses will fail within five years. In order to avoid this issue, you need to make sure that you also avoid making the common financial mistakes that have plagued companies throughout the Internet age.

Failure to Discuss Your Business with a Chartered Accountant

Most new businesses will not be large enough to justify the expense of having a full-time accounting team, but this does not mean that you should skimp altogether on the importance of having an accountant help you with your initial setup. In fact, working with a Chartered Accountant before you incorporate your business is the best way to ensure that you will be properly prepared to deal with taxes, audits and other necessary aspects of business life.

Failure to use Industry Specific Software

Although some people still enjoy the process of maintaining ledgers and log books by hand, this is one of the most inefficient things that you can do. Some people believe that it is enough to maintain your records with basic software options such as Excel, but it is even better to invest in software that has been created for your industry. For example, if you are going to open a small apartment community, it will make more sense to utilize MRI to track your resident information than to rely on a simple spreadsheet.

Failure to make the Necessary Registrations

If you do not work with a Chartered Accountant or other qualified professional, the odds are high that you will also fail to make all of the necessary registrations for your business. For example, you might need to register for service tax or VAT, but without the proper advice, it would be easy to miss either of these steps.

Failure to Accept Credit Cards and Paypal

Although most brick and mortar establishments are not going to accept Paypal, it is necessity if you have an online store. You also need to offer your customers the option to pay for their purchases with a credit card if you want to have any chance of surviving. Although it is expensive to allow customers to use their credit card, it is much more expensive to lose a lot of sales because you do not have a credit card machine. Keep in mind that customers do not appreciate it when a credit card surcharge is added to their order.

Failure to File Important Papers

In your zeal to get your business off the ground, it can be very easy to misplace important paperwork such as bank statements and sales receipts. Unfortunately, this also makes you an easy target for an audit. Keep in mind that if you are unable to prove that you have filed the proper taxes, you might end up paying a lot more money than necessary. Therefore, it is crucial to implement a filing system as soon as you start your business, and make sure that the system is actually followed on a daily basis.

It is also important for new business owners to review their profits and expenses on a monthly basis. Doing this can help you quickly locate any issues that will keep you from operating in the positive, and it will also ensure that you have a solid understanding of your company’s financial strengths and weaknesses.

This article was written by Donald Turner in coordination with Craig Lynd on behalf of KEL Credit Repair. Check out their website at www.kelcreditrepair.com to see how they can help you repair your credit so you can focus on your business.


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