Finance Tips

Avoiding Common Financial Mistakes Made by Entrepreneurs

For so many of us business owners, numbers are our least favorite part of the gig.

Entrepreneurs by nature are visionaries, and have a unique talent or gift they want to share with the world – it’s what drives their businesses. But when it comes to the business’s bookkeeping – well, sometimes the numbers get pushed into a corner and forgotten about or ignored.

It’s no secret that this approach can be harmful to a new (or even established) business. Getting your books in order can be one of the most important things you do for your business to ensure it’s both profitable and sustainable.

We chatted with bookkeeper/finance coach Stacey Shieh Lee about some of the top things to be on the lookout for as a business owner. (You can watch the full webinar here).

But her biggest piece of advice? Know when to ask for help, and don’t be afraid to do so.

“People judge the performance of their business so harshly that they’re unable to share that information with someone who can actually help them,” Shieh Lee said. “They say, ‘You’re going to judge me’ or ‘I did this wrong.’”

Once business owners can get past their initial objections or fears, many realize that they’re not alone. It’s no surprise that entrepreneurs – who are good at so many other things – aren’t necessarily at the top of their games when it comes to bookkeeping.

“You are an entrepreneur; you are a visionary person,” Sheih Lee said. “You’re not necessarily a financial person. We’re not built to be a CFO all of a sudden because we became a business owner. … All of a sudden you’re a business owner and you’re supposed to know all the rules.”

Lucky for business owners in our WMN / WRK network, they can reach out to people who do know those rules, like Shieh Lee.

One of the most frequent questions we get is about taxes (everyone’s favorite subject). Having a financial coach like Shieh Lee, or at least having a designated tax accountant you know and trust, can be helpful when it comes to slogging through the ever-changing landscape of tax law.

A helpful tip is to separate your business and personal expenses. Don’t use your personal credit card or bank account to pay for business expenses, or vice versa.

“One of the biggest mistakes founders or entrepreneurs start with is they think they’re the company,” Shieh Lee said. “Everything they do, they just use one credit card or business account. When it comes to tax time, it becomes very blurry. … Not being able to separate it all out is a huge issue. What happens is from a tax perspective, the IRS will essentially treat that as you paying yourself, and if you pay yourself, you have to pay taxes on that.”

Suddenly being on the hook for taxes you didn’t even know you’d have to pay – it’s an all-too-common mistake new business owners make.

But another common oversight involves not collecting money themselves: Shieh Lee says that she worked with a client once who hadn’t collected on more than $400,000 in accounts receivable. Entrepreneurs often have so many other things going on that steal their focus, that sometimes collecting on money they’re owed isn’t a priority. That’s where a bookkeeper or other financial professional can come in handy. They can focus on the things you can’t – especially the ones that will bring in more revenue.

Paying someone dedicated to the financial health of your company can save you thousands down the road. Shieh Lee had another client who owed about $45,000 in back taxes, which had been paying interest on for years. But Shieh Lee came in and told her what no one else had – “hey, you actually have enough money to pay this off. Don’t waste your time paying interest.”

Not wasting your time is the basis of many of the reasons why entrepreneurs should hire a bookkeeper. The less time you spend fretting over numbers and working through the jumble of your finances, the more time you can focus on the pieces of your business that fire you up.

“Your tax professional, your bookkeeper, your in-house CFO – make us your partners in creating the business that you want,” Shieh Lee said. “Don’t be fearful to talk to people who know more than you about certain things. We may know more about numbers, but you are the business owner. I empower your vision, but it’s still your vision.”

To learn more about Stacey or to contact her, visit her WMN / WRK profile here.