5 Money Pits for Small Business Owners and Freelancers
Do you ever feel as though you’re working harder than ever, yet your net income doesn’t reflect that? You could be throwing your profits away. Here are 5 things to eliminate and improve your bottom line.
1. Not tracking expenses in real time
January rolls around, and you finally add up receipts for expenses to report on your tax return. Have you ever been shocked at the amount of money you’ve spent on one item over the course of 12 months? Keeping running totals of expenses allows you to recognize trends in spending. Recognizing trends triggers change for the better.
For example, $6 for printer paper at Target seems like a reasonable expense. However, add up $6 per week for 52 weeks. That’s $312 per year. If this expense were tracked and you noticed that running total climbing, you may have made an effort to switch vendors for better value.
2. Late Payment Penalties
An efficient bookkeeping system reduces the number of errors, omissions and late payments that can cost you penalties. People run into these issues when they’re paying bills based on when they receive income versus their actual due date. There are two possible issues here:
a. Income is not being received on time and;
b. Missed payment due dates
Both of these issues can be prevented with an automated accounting system with payment reminders for accounts payable/accounts receivable.
3. Unused Subscriptions
Have you have looked at your bank statement and realized that you’re paying on 2 Hulu accounts? Or is that just me? It’s easy to put in your credit card information and forget when the subscription payments are small. $11 per month easily went under my radar. Unfortunately, one year of this overlooked small expense turned into a waste of $132.
If you’re paying on a subscription that’s not helping your business in dollars, it’s a waste. Scrap that expense. Again, great accounting systems with expense tracking are the remedy.
4. Ineffective advertising
Every one of the business dollars you earn should be traceable to a source. When the majority of your customers find you via free sources and a negligible amount find you via paid advertising, you’re wasting money. Directories can be great for getting the word out, but make sure the message is reaching the correct customer base.
5. Wrong business structure
Selecting a business structure is one of the most important things that you'll do as a business owner. It's important to consult with an attorney, enrolled agent or someone with significant experience in this field. Choosing the wrong structure for your business could result in avoidable income taxes. It could also leave your personal assets open to lawsuits. Keep in mind that there are many options to help you determine the structure that's right for you. Your local SBA office is a great resource for more information.