The bottom line is critical in business. Every entrepreneur should aim to grow revenues and increase efficiency (or cut costs), but there are common mistakes that cause entrepreneurs to lose money.
The good news is that these mistakes are easily avoidable.
Mistake #1: You do not have a business support system
What I mean by this is you are growing your business alone and you do not have a business coach, or any other type of support system to help you and offer advice. I know … I know … this has nothing to do with accounting and I am an accountant.
However, this mistake is often made and it’s a money pit. Think about it. All of the hours and money wasted as you try to do something on your own and you’re not really getting anywhere. That is time and money spent you could have saved.
You’re at a deficit of time lost without the knowledge, guidance and tools a good business coach provides. If you’re stuck doing the wrong things and not generating top-line growth you’re leaving a lot of money on the table.
Believe me, I know — I have been there. The right support system will help you with growth and efficiency.
Mistake #2: You mix personal and business finances
I see a lot of entrepreneurs doing this and it is one of the quickest ways to lose money. How? Well for starters, there is no real way to know what money in your account is for business and which is your personal funds.
For organizational and tax purposes you should keep your business funds separate from your personal finances. On top of that, if the IRS finds that you are mixing funds it can open you up to a business audit and/or a personal audit which will cost you a lot more.
Mistake #3: You’re not tracking all of your expenses
Not only does the 13 page IRS guidelines for business expenses have you perplexed, but it gives you a headache and nausea so you have decided to ignore it. Boom! You just lost money. I guarantee it.
Not keeping track of your expenses throughout the year and then trying to gather everything at the end of the year just doesn’t work. For your business, you are able to deduct all “ordinary and necessary” business expenses. However, you cannot deduct what you have not documented.
Mistake #4: You’re not claiming a home office deduction
For many entrepreneurs, your office is in your home yet you don’t claim the deduction because in the past it was considered a red flag for getting audited. However, if you are legitimately entitled to the deduction, take it.
You are losing money when you don’t because there are deductions you are allowed when claiming a home office. To qualify, your office would need to be a room used solely for business purposes. And if you do qualify, you are able to write off a percentage of your home expenses including rent or mortgage payments, utilities and insurance costs.
Mistake #5: Tax avoidance
So many entrepreneurs are very apprehensive to speak to an accountant because they just don’t want to deal with any of the taxes including the quarterly taxes, etc. But here is the thing — you really need to meet with an accountant and it can save you money in the long run.
An accountant can do everything from helping you avoid tax penalties (i.e., saves you money) to setting you up with the right salary to making sure you are on track with your quarterly tax payments (i.e., saves you even more money).
Yes, I know taxes means you have to pay money, but look at it this way … if you don’t pay business taxes then you will owe penalties and late fees and even could go to jail. So, yes in the long run talking with an accountant can save you a lot of money.
Are your business finances on track? Find out.
This article has been edited and condensed.
Lisa Robinson is the founder and CEO of Li$a Marie Accounting and has over 15 years of accounting experience. She is your down to earth, sassy southern accountant who specializes in taking the chaos out of numbers and helping entrepreneurs get rid of their accounting headaches. All the while showing her clients that numbers don’t have to be scary, but instead can by very sexy! She invests the time to understand you and your business and create a plan that will help your business grow. For more information or other accounting and tax tips, visit her Facebook page. Connect with @LisaMarieAccoun on Twitter.
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