Oops! 5 Big Financial Mistakes Small Businesses Make (And How to Dodge Them Like a Pro)

Running a small business is hard work but can be extremely rewarding. Business owners wear so many hats and with everything they must juggle on a daily basis, sometimes problems can arise.

These mistakes happen, especially money mistakes, but they don’t have to. Let’s break down some of the most common financial blunders small businesses make and how you can avoid them.

1. Avoid the Quick Pay Service Disaster - Mixing Business and Personal Finances

So, you’re buying supplies, paying contractors, and grabbing takeout with the same account? Yikes. Mixing personal and business finances is like trying to untangle your wired earbuds….what a jumbled mess.

How to Avoid It:

• Open a dedicated business bank account. It can be done quickly -simple contact one of our personal bankers, they are ready to help!
• Get a business credit card and ONLY use it for work expenses.
• Track everything with accounting software like AutoBooks (which works directly within your Farmers Bank account!) Talk to Suzi about Autobooks or what options are best for your business!

Trust me, your future self (and your accountant) will thank you.

2. Where Did All My Money Go? - Ignoring Cash Flow

You made a bunch of sales this month, nice work! But wait, why is your bank account so low? Because cash flow is about timing, not just revenue. If money isn’t coming in fast enough to cover expenses, you’ve got a problem.

How to Avoid It:

• Get paid faster: Invoice immediately and use payment tools
• Negotiate better terms with vendors to delay payments when needed.
• Keep a cash reserve for slow months (aim for 3-6 months of expenses)
• Apply for an operating line of credit to help manage the uncertainty. We have a great team of commercial lenders willing to help. Stop in sometime and visit!

3. The “ Just Need Exposure” Trap - Pricing Too Low

Look, getting exposure is great, but it doesn’t help pay the rent. If you under price your products or services, you’ll may feel overworked and underpaid.

How to Avoid It:

• Do your homework! A strong business plan can do wonders. Who is your competition? What are your strengths and weaknesses? What is your competitive advantage?
• Factor in all costs - time, materials, overhead - before setting prices.
• Raise your rates - as your experience and skills grow, you should consider your pricing should too.

4. The IRS Surprise Party - Forgetting About Taxes

Nothing ruins your year faster than an unexpected tax bill. If you’re not setting aside money for taxes, you might be in for a rude awakening come April.

How to Avoid It:

• Set aside at least 25-30% of your income for taxes.
• Pay quarterly estimated taxes (Yes, this can be annoying, but it prevents a huge bill later).
• Work with a CPA or tax professional to make sure you’re not missing deductions.

5. The Superhero Syndrome - Trying to DIY Everything

Yes, you’re smart and capable, but you don’t have to do everything alone, especially when it comes to finances. Winging it with spreadsheets might work for a while, but it won’t cut it in the long run.

How to Avoid It:

• Consider hiring a bookkeeper (even part-time) to help keep your numbers in check.
• Consider accounting software instead of random sticky notes. (*cough* talk to Suzi *cough*)
• Consult a financial advisor (or one of our commercial lenders) before making big decisions.

Final Thoughts: Smart Money Moves = Business Success

Avoiding these financial pitfalls can mean the difference between struggling and thriving. It also helps to have a great financial team in your corner. We love what we do, and would love to help!