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Biggest Financial Mistakes Online Entrepreneurs Make

During my career of coaching business owners and entrepreneurs, here are some of the biggest financial mistakes that I have encountered and found as a common thread:

  1. Failing to track expenses: In order to put yourself and your company in the best possible tax position, it’s important to track your business expenses properly so that you can have accurate financial reporting as well as maximize your tax deductions. A helpful program for this is Quickbooks Online.

  2. Not separating business and personal income and expenses: Failing to separate business expenses and personal expenses is the leading cause of having no clear financial picture for business owners. Always keep your business and personal expenses separate so that you can see how your business is performing on its own. This way, you can see what you need to do more or less to get the results you desire in your business. Start by opening a business checking account with Novo Bank. It’s completely free, with no minimum balance and no service fees.

  3. Overspending on tools and software: While tools and software can be helpful for online entrepreneurs, overspending on them can quickly eat into profits and hinder growth.

  4. Neglecting to set aside taxes: Online entrepreneurs may forget to set aside money for taxes, which can result in a large unexpected tax bill at the end of the year. This is another reason why you should be keeping track of your income and expenses because without knowing your net profit, it will be difficult to estimate your tax liability.

  5. Failing to plan for slow seasons: Online entrepreneurs may experience slow seasons where sales and revenue are lower. It's important to plan for these periods and have a financial cushion to weather the storm. Be sure to download my business budget template (HERE) to assist you with building a budget for your business.

  6. Not applying for capital to get business funding to expand their business: Most online entrepreneurs are paying for their entire business out of pocket and not tapping into the opportunity to leverage OPM (Other People’s Money - ex. The bank, grants, etc.) to grow and sustain their businesses.

  7. Ignoring the importance of cash flow: Cash flow is critical for any business, but online entrepreneurs may neglect it in favor of focusing on revenue. This can lead to cash flow problems down the line, which is why having some business funding in place is important.

  8. Not having proper systems in place: Your business should be able to run in a manner of “rinse and repeat”. Meaning, you need to have documentation set up for your company (ex. legal contracts, financial policies and procedures) and technology that supports all areas of your company (ex. Finance - QuickBooks, Project Management -, Scheduling - Motion).

  9. Not seeking professional financial advice: Online entrepreneurs may try to handle their finances on their own, but seeking the advice of a professional can help them avoid costly mistakes and make more informed decisions.

  10. Not having a business plan in place: Even though you are an online entrepreneur, no matter what phase of your business you are in, you should have a business plan to assist you with being able to measure your success. After all, if you have no goal… what do you have?

By avoiding these common financial mistakes, online entrepreneurs can increase their chances of long-term success and financial stability.

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