Business owners wear many hats to keep things running smoothly in the day-to-day operations of their company. Consequently, this can mean they overlook the importance of having a good financial plan, leaving themselves vulnerable to financial planning mistakes.
At Kowal, our financial advisors work with business owners every day, and we are aware of the downfalls and problems that can come up. There are several mistakes both large and small business owners can make when it comes to financial planning, but we have narrowed it down to the four we believe are the most common.
4 Common Financial Planning Mistakes Business Owners Make:
- Assuming your business is financially healthy. Just because you meet payroll, stay current on taxes, and receive payments from customers, does not mean your financial planning needs are covered. While these items are important items from a bookkeeping standpoint, they do not necessarily address financial planning. Be sure to focus on tax saving opportunities and how you manage tax liabilities as these are key components of a proper business financial plan.
- Mixing personal and business finances. Blurring the lines between personal and business finances can lead to confusion, tax issues, and hindered financial planning. Business owners should maintain separate bank accounts, credit cards, and financial records for their business activities. Separation of personal and business will help simplify your financial life and help cut down on financial mistakes.
- Mismanaging cash flow. Many business owners focus on generating sales and revenue, often overlooking the importance of effective cash flow management. Business Owners need to ensure that the handling of cash inflows and outflows are aligned with the long-term vision for their company.
- Treating the business exit like a transaction. Exiting from your business involves more than just the sale of the business. The business itself, and you as the owner need an exit plan in place for life after the exit. Potential buyers will want to see your business plan, financial statements, insurance policies, and that is just the beginning. A proper financial plan will help you outline your exit plan.
How to Create a Business Financial Plan
Financial plans do take time to create and implement, however, the reward is with it. A well-designed financial plan keeps you focused, enables you to evaluate opportunities, and prepares you for the future.
Don’t fall into financial planning mistakes. To get started on a financial plan for your business, schedule a no-obligation review meeting with one of our fiduciary advisors!
Disclosures:
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of Kowal Investment Group, we do not render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
Kowal Investment Group, LLC (“Kowal”) is a Registered Investment Advisor. Kowal will maintain all applicable registration and licenses as required by the various states in which Kowal conducts business, as applicable. Kowal does not provide legal, accounting, or tax advice. Consult your attorney or tax professional. Representatives have a general knowledge of the Social Security tenets. For complete details on your situation, contact the Social Security Administration.
