Running a small business is both exciting and challenging. Learn the financial mistakes you should avoid.
Business owners are responsible for ensuring their ventures thrive financially.
The U.S. Bureau of Labor Statistics shows that approximately 20% of small businesses fail within their first year, increasing to 45% by their fifth year. In Canada around 30% of small businesses fail within 5 years of start up, growing to 50% within 10 years, and 70% within 18 years.
While many factors contribute to small business failure, cash flow and financial management problems are at the root of most closures. A lot can go wrong if you aren’t paying attention to things like budgeting and bookkeeping. No matter how old your business is, avoid the common pitfalls listed below to safeguard your business’s financial health.
Here are five financial mistakes to avoid if you're a business owner:
Mistake #3: Neglecting your business credit
Business credit plays a significant role in a company's financial well-being. Neglecting to nurture and maintain good business credit can hinder growth opportunities and limit access to financing.
Once you understand where your current standing is, take the following actions to maintain and improve your business credit. Start by:
- Paying off your business debt and credit card debt;
- Paying your business's regular monthly bills and other expenses;
- Checking your credit report regularly for changes or unauthorized activities;
- Keeping your credit utilization to a minimum.
As a small business owner, it's essential to manage your business finances as effectively as possible.
Small business financial management can be a complex process, but it is key to your business's long-term success. Learning from these insights and implementing sound financial practices will empower small business owners to navigate challenges and achieve sustained success.
