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Avoiding Costly Financial Mistakes for your Start Up Business

avoiding costly mistakes

Many new start up companies start out with a decent budget but often there isn’t enough money to keep the company afloat while it is going through its growing stages.  More often than not this starter money is personal money that the new business owner has saved over the years.  There is no endless pit of money available.

  1. Not delegating the responsibilities:

In order to keep the expenses down the new business owner will take on all the responsibilities of the company and it becomes a one man show. This is draining but also creates a risk.   While you are doing all these other business chores, it is taking you away from the main goals of growing the business.   For example, you may be spending several hours a week on your bookkeeping and your financials.   These several hours could be spent on drumming up new business.   This financial task can be put into the hands of a qualified small business accountant and still be cost effective.   Most likely just increasing the business income by a few sales is going to more than cover your accounting costs.

  1. Caution with re-investing:

Of course you want to continue to re-invest in your company.   This means taking the money you are making from it and putting it back into the business.   Be careful that you don’t run before you walk with your business growth.  Putting the money back in is a good move, but immediately putting it back out for business growth should not be done unless where the company is at the moment is solid, and is ready to move up to the next level.

  1. Keep a nest egg:

Just as you know that you should always be thinking of your financial future on a personal level, you need to think the same way for your Company. Keep some money in reserve to help you through a potential slump or emergency.

  1. Relying of the experts:

As a business you have a lot of expert resources at your disposal.   We have already mentioned the value of a good accountant.   Also, consider financial business consultants, and your business bank manager.   They all can give you valuable information regarding the handling of the business finances.

  1. Keep your personal and company entities separate:

No matter how small your business is, treat it as a business and a separate financial entity.   Not doing so can cause you some serious tax implications as well as other financial hardships.

These 5 simple but important tips will help you to avoid some of the financial disasters that many start up companies end up in. It is really unfortunate when a new business is an excellent concept but has to close its doors because of a start up financial disaster.

 

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Sam Seidman, CPA, CA, LPA
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Toronto, Ontario
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Email: sam@torontoaccountant.ca

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