Are you starting a business? It’s exciting! But that first year? It can feel like a wild ride—lots of ups and downs. Many new entrepreneurs stumble in ways that could be avoided. Here are some common pitfalls and how to sidestep them like a pro.
Skipping the Business Plan
Think a business plan’s just extra paper? Think again. Having a solid plan is like having a map on a road trip. Without it, you might end up lost. A business plan helps you define your goals and lay out how you’ll reach them. It’s not just for getting a loan; it’s your own guide.
Underestimating Costs
You might picture your startup costs as a tiny hill, but in reality, they can turn into a mountain. Many new business owners forget to factor in hidden expenses—like taxes, marketing, or even unexpected repairs. Keep a close eye on every dollar you’ll need. It’s smart to have a cushion in your budget for those "uh-oh" moments.
Tangled Personal and Business Bank Account
It’s easy to swipe your personal card for a business lunch or use company funds for a family outing. This mix-up can create chaos. Picture a painter who throws all colors into one jar—everything turns muddy. Mixing finance complicates things and can lead to trouble with the CRA. We advise new entrepreneurs to do themselves a favor and open a separate bank account and credit card for their business. All of your business transactions must run through here and come tax time, you will thank your past self and fist bump for this thoughtful consideration.
Ignoring Record Keeping
You might think, “I’ll remember all my transactions,” but that’s a slippery slope. If you don't track your income and expenses regularly, you’re setting yourself up for confusion later. Imagine trying to find a single star in a cloudy sky. A clear record helps you keep your financial picture bright.
Not Tracking Cash Flow
Cash flow is the lifeblood of your business. If you’re spending cash faster than it’s coming in, you’ll end up in a desert with no water. Many first-year owners
Ignoring Your Salary
If your business model doesn’t include paying yourself, you are volunteering not establishing a business. It might seem like you are sacrificing for greater gains in the future but in reality, you are creating financial troubles in business transactions for yourself.
Not Planning for Tax Returns
Taxes can be like a hidden reef in the ocean—dangerous if you’re unaware. Many new business owners don’t set aside money for taxes, assuming they won't owe much. Calculate your expected taxes or it’s better to seek professional help and set aside a percentage of your income. This way, when tax season arrives, you will have the funds ready leaving you free to focus on steering your business towards success instead of worrying about finances.
Trying to Do It All Yourself
Many entrepreneurs believe they can handle everything themselves. However, trying to juggle all aspects of accounting can lead to mistakes. It’s like trying to be a chef and manage a restaurant at the same time—at some point, something’s bound to burn.
Consider hiring an accountant or an accounting service, especially during your first year. They can help you avoid common pitfalls, sort out your finances, and give you peace of mind. Investing in some professional help can pay off in the long run.
Conclusion
Your first year in business is often filled with learning curves, especially regarding accounting. Avoiding common pitfalls, Keep your financial ship steady, and you may just sail smoothly into the next year. Filing Taxes is there to help your small business succeed. Connect with Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step toward proper management of your finances.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.