Avoiding the most common small business tinancial mistakes

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By Noah Rue

With so many moving parts to starting a small business, it’s no surprise owners find themselves tripped up by one thing or another in their company’s journey to longevity. Although entrepreneurship without mistakes would be a dream, it just isn’t a reality.

Financial mistakes, in particular, are hard to come back from in a small business. So, you must be aware of the most common money mistakes you can make in your small business and do everything you can to avoid them.

Educating yourself on the most common small business financial mistakes will help protect your company from harmful legal consequences and financial ruin. It will also keep your company in good standing and prepare it for growth.

So, let’s look at four common small business financial mistakes and how to avoid them.

Mishandling credit

Mishandling credit is one of the most common small business financial mistakes. Small business owners often get into the habit of spending more than they can pay off every month on their business credit cards or using business loans funds for personal purchases. As a result, they cannot fulfill their repayment obligations and default on their loans.

To ensure you’re using credit appropriately, understand all the details about what happens when you borrow, including your interest, payments, how principal works, and so forth. Then, make all of your payments on time and do your best to pay off credit card balances in full every month.

Furthermore, one reason small business owners end up mishandling their credit is that they overspend.


Overspending is one of the worst things you can do for your small business’ financial health. Overspending on startup costs and other unnecessary purchases can lead to severe consequences like losing your most valuable employees because you can’t pay them.

Be sure that your employees can depend on a steady paycheck and that your spending habits are healthy by creating a budget and sticking to it. You must also only make purchases for your business that are absolutely necessary to it functioning seamlessly.

Inaccurate accounting is another common small business financial mistake to avoid at all costs.

Inaccurate accounting and bookkeeping

Bookkeeping and accounting are crucial for keeping your business finances organized and accurate. But, unfortunately, many small business owners aren’t adept in bookkeeping and accounting best practices, and their financial health suffers.

Learn an appropriate system for keeping your books. This ensures timely payments from your clients, customers, vendors, and suppliers. It will also keep you informed on who is past due on their invoices so that you can go about collecting payment productively.

It’s also a good idea to hire an accountant or financial professional to keep your business’s finances in order. The intricacies of accounting can be overwhelming. So, having someone on your team with this expertise that can accurately document, maintain, and report on all your financial transactions is beneficial.

In addition, bringing a financial professional on board that specializes in other business finance aspects like investments, budgeting, banking, and financial markets allows you to cover your business finances holistically.

Lastly, you should avoid making risky investment decisions when starting your small business.

Making risky investment decisions

Many small business owners get sucked into the excitement of making risky investment decisions right off the bat. As a result, the financial obligation associated with those investments is usually too much to handle, and they end up taking their businesses down with them.

Instead of making risky investment decisions at the start and throughout your business, make reasonable ones. Determine what type of investments you can make based on your financial standing. If your finances won’t allow you to recover from an investment should it go wrong, it isn’t the right time to make that investment.

Granted, you will have to take some risks in your business to see it grow, especially with investments, but they should be well-thought-out, and a plan should be in place should those investments not generate a return as expected.

Ultimately, making investments in your small business is integral to your growth. However, it’s best to take reasonable risks in your business only after studying their advantages and disadvantages in-depth.


Avoiding the most common small business financial mistakes is crucial to not just your business growth but your sanity as a business owner. Learn all that you can about the above and other common mistakes small business owners make with their finances and how to avoid them to give your business the best chance of growing year after year.


Noah Rue is a journalist and content writer, fascinated with the intersection between global health, personal wellness, and modern technology. When he isn’t searching out his next great writing opportunity, Noah likes to shut off his devices and head to the mountains to disconnect.

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