It is exciting to start your own business. You have an idea, you would like to make it happen, and also you want to become successful. But in the rush to launch and expand, many start-ups overlook finances. Without knowing how money moves into and from the business, the best ideas can fail.
The biggest reason startups have trouble with money is because they do not bring in a start-ups accountant early on enough. An accountant does much more than merely taxes. They enable you to develop a financial foundation for your company. Without one, mistakes could cost a lot.
In this article we will discuss the top 7 financial mistakes start-ups make with no accountant and how to stay away from them.
Top 7 Financial Mistakes Start-Ups Make Without an Accountant
Below are the top 7 mistakes that start-ups make without an accountant:
1. Mixing Personal and Business Finances
New business owners frequently fund their start up with personal bank accounts or credit cards. It starts feeling easier when money is tight. But combining personal and business finances could spell trouble.
Without clear separation, you can not track what your business is making or even spending. You might also encounter issues during tax season or in case you actually get audited. A start up accountant can create a distinct company bank account, educate you on exactly how to monitor expenses and maintain financial documents organized right from the start.
2. Poor Cash flow Management
Cash flow is the life blood of any business. It's not so much how much money you make, it's how that money flows in and out. Start-ups frequently make the mistake of believing that huge sales or funding are safe. But they still can get cash if they are not very careful.
Say your clients pay you in 60 days but you need to pay rent, salaries, or suppliers today. You might be in a crunch if you are not handling your cash flow. A start up accountant helps you forecast your money requirements and plan so you are not caught unawares.
3. Ignoring Tax Obligations
Taxes can be confusing, particularly for first time business people. Every business has various tax responsibilities based on the place it's situated, how it's organized and what it sells. Lacking expert assistance, you can underpay (and pay penalties) or overpay (and lose money).
Start-ups miss key deadlines or fail to save for taxes. An accountant lets you know what taxes you owe, when paying them and also how to obtain credits or deductions. A start up accountant will also ensure your documents are accurate to prevent legal issues later on.
4. No Budget or Financial Plan
Many brand new business owners are building their product or service. They might not spend time preparing a financial strategy or budget. But without having a budget, you never know precisely where your cash is going or the length of time your business is able to endure.
Without any planning, you might overspend in a single area and not have enough for essentials. An accountant develops a realistic budget, forecasts income and costs along with track performance. So rather than guessing, you can make wise choices.
5. Not Understanding Profit vs Revenue
It is exciting when money comes in. But just because your business is producing product sales, it is not making any profit. Common mistakes consist of confusing revenue with profit. You may make $10,000 per month yet spend $12,000 on rent, advertising and supplies. That is a loss, not really a profit.
You can easily miss this key detail without proper financial analysis and reports. A start up accountant may prepare reports including profit and loss statements that show you where you are and what you could improve upon.
6. DIY Accounting with No Experience
There are tons of online tools and software for bookkeeping and many founders attempt to handle their finances themselves in the beginning. This works for really small businesses but makes for mistakes when things get more complex.
You might forget to record expenses, miscategorize income, or lose crucial data. Additionally, the precious time spent doing your own personal accounting might be used growing your business instead. Employing a start up accountant lets you do what you do best even though they deal with the numbers.
7. Lack of Financial Reporting for Investors
If you would like to raise money from Investors or banks, they would like crystal clear financial reports. They consist of cash flows, financial statements, income statements and forecasts. Without these documents, you will have problems demonstrating your small business is financially healthy.
Some start-ups miss out on funding because their numbers aren't reliable or organized. An accountant builds those reports and presents them professionally. It shows investors you are serious and your business is being handled responsibly.
How a Start Up Accountant Could Save You Money and Time
You may think it costs too much to hire an accountant when the business is new. However without one the price can be higher. Fixing financial mistakes, paying penalties or losing investor trust can cost far more than expert assistance can damage your business.
An excellent start up accountant does a lot more than keeping the books, they're an advisor. They help you plan, remain compliant and grow with confidence. Think of them as your financial partner invested in your success.
Related Resources
- Top Reasons to Hire an Accountant for Small Business Success
- Hire an Accountant For Your Business: Benefits, Eligibility, Process
- 10 Signs You Should Hire an Accountant for Personal Finance
Starting up a business is a big adventure and filled with learning. However, you can not do it all on your own, particularly in your finances. By not making these typical money mistakes and employing the proper help early on, gives your business the greatest chance of success.
Remember, money mistakes are seldom spoken. They might not be obvious immediately, however they are going to ultimately hold you back. Hiring a start up accountant from The Fino Partners helps you catch problems early, encourages good habits and also keeps you on track to success.
