Business finance mistakes to avoid

It is not overstating to say that how successful you are with your business finances will determine whether or not your business survives and grows. Business owners who fail to closely manage the finances of their business often see their business quickly fading away. It is important to understand that there are many different mistakes that can be made in business finance that can have a dramatic effect on the finances of your business. Avoiding making these mistakes is crucial to the financial health of your business. These are some business finance mistakes to avoid-

- Failing to have a bookkeeper-Too often business owners think that they have to do everything themselves. This is a serious mistake. Running a business from day to day presents a myriad number of challenges and problems that the business owner must take care of. Taking care of the books does not need to be one of these challenges. Hiring an experienced bookkeeper will allow the business owner to focus on the priorities of the business while having a second pair of eyes to help manage the books. Whether you choose to hire a bookkeeper in-house or outsource the work using the services of a bookkeeper can help to keep your business finances far healthier. Keep in mind though that bookkeeping only works effectively if you are giving all of the information to the person who is handling the books. Failing to do this negates all of the benefits of hiring a bookkeeper in the first place.
- Failing to balance the books every month-There is a reason that your business banking statement comes every month. You should make sure that your bookkeeper is balancing the books every month with your bank statements. This is the best way to stay on top of what is happening with your cash flow. Many businesses (even those with bookkeepers), fail to take care of this task on a monthly basis. This is a crucial mistake that can lead to finding out you have far more serious financial problems then you thought. Make it a policy that when the bank statement arrives its time to balance the books.
- Failing to backup- While technology has negated much of the need for paper backup it doesn't mean that it has reduced the need for it all together. As long as there is the possibility of a business audit then you need to make sure that your business has a paper trail to back up its finances. You should make sure that this backup is available at all times in order to avoid the last minute scramble that will occur if you are notified of an audit. It is also important to keep in mind that computers do fail so having your backup on a computer system simply isn't enough.
- Failing to use the right categories-There are standard categories that exist for most business finance functions. However, many times there are extra categories that are created or the person who is entering them chooses the wrong category. It is crucial for the optimum health for the finances of your business that the right categories are used and as few categories as possible are "created". Following standard accounting procedures will help to insure that your business finances are being managed as effectively as possible.
- Failing to correctly classify employees-If your business is extremely small, has only in-house part or full time employees, or you work alone then this mistake will not apply to you. However, if your business uses a lot of freelancers or consultants then you need to make sure that anyone who works for you is classified correctly. This is especially important when it comes time to pay taxes since there are different rules for different classifications of employees.