The 5 Most Common Money Mistakes That Prevent Your Small Business from Thriving
We’ve all heard the stats—or some fear-inducing variant of the stats—telling us that the odds of having a small business that survives its fifth birthday are about as good as winning Lotto 6/49.
Many of these circulated stats come from the US (this article is a great example), but it’s no secret that many businesses struggle and die unpleasant deaths.
The good news is that in Canada, the numbers are more hopeful,
But is that
If my doctor told me that my odds of survival are little more than landing “tails” on a coin flip, I wouldn’t be celebrating.
Besides, you don’t want to be struggling through your years of business so you can say you survived to business adolescence. You want your business to thrive. You want your business to serve you and your family.
But so often, it feels like you live to serve your business.
The struggle, however, is not with the craft. You’re an excellent designer, chef, carpenter, electrician, pet groomer, delivery specialist, real estate agent, plumber, visionary. You have so much to offer the world.
The struggle is paying the bills and making a profit.
The great news is that the financial success of your business is not a game of chance.
There are results-driven steps you can (and should) follow to ensure your business is providing you the profit and freedom it’s supposed to.
To completely revitalize your financials, it’s helpful to get some personalized guidance. But an easy way to get started is to make sure you’re avoiding these mistakes we see well-intentioned business owners making every day.
Mistake# 1: Thinking
You did the work, so it's your money, right?
But what about taxes, payroll, payroll remittance, and all your other expenses? If you don't put money aside for these money grabbers, you'll
A few days, weeks, months...
It may not seem like a big problem—at first. But delayed payments will deteriorate relationships with suppliers, employees, and contractors.
You can't have a healthy business without trusted relationships.
Missing tax payments are also a sure way to trigger an audit—not to mention the penalties and interest charges that come with failing to pay your taxes.
So unless you're looking to replace your business relationships with a new intimate relationship with the CRA, make sure you have funds set aside to cover all the costs associated with running a healthy business.
If you’re finding it tricky to remain on top knowing what funds need to
Mistake# 2: “Winging it” instead of budgeting.
Speaking of setting aside money for expenses, the second mistake we see business owners make is failing to run their businesses on a budget.
Why is a budget so important?
Just as with your personal finances, you need to have a budget for your business, especially if you’d like to see regular profit.
(We’re guessing you do.)
This not only means allocating money for expenses but also checking in at least every month to ensure you’re remaining on budget and making adjustments to spending, staffing, invoicing, etc. as needed.
You can probably guess from our name,
And no, it is not because we are gluttons for punishment. Precisely the opposite. We want to see you thrive (almost) as much as you do, and
So, if you need help
Mistake# 3: “Forgetting” to register for GST when your business is earning more than $30,000 per year.
Maybe you didn’t notice you reached this business milestone. Maybe you forgot—or didn’t realize—registering for GST was necessary. Or maybe, just maybe, you think you don’t really have to register for GST.
You might think you’re getting away with it, but eventually, CRA will find out.
And what comes next is not pretty.
Remember the audit triggering we talked about in Mistake #1? Well, failing to register for GST invites the CRA to audit not only your business but also you personally—even if you’re incorporated. If you have a spouse, he or she is also fair auditing game.
If you haven’t hit $30,000 annually just yet, pay attention to when you do (or hire a certified bookkeeper who will pay attention for you). If you’ve already surpassed these earnings and have not registered for GST. Please, stop reading this and go do it now, or ask us to help.
Mistake #4: Writing off your Norwegian-Spa experience as a business expense.
Yes, you attended a conference last weekend and claimed the hotel, meals, and transportation as business expenses. Yes, the spa was in the general vicinity of the conference room. And yes, you went there to unwind after a full day of meetings.
But no, your facial on Saturday does not count as a business expense.
There is a lot you can write off as a sole proprietor or incorporated entity, and we want to make sure you get all those advantages, but we also want to make sure you remain above reproach—at least in the eyes of the CRA.
Mistake #5: Thinking Google knows everything.
So you know there are a lot of expenses that you can write off, but also that there are many non-business expenses that are accounting faux pas if written off.
Some expenses are obvious: staples for the office stapler? Definitely. Accessories for your cat? Probably not (unless your business involves cat accessorising).
But what about that lunch that wasn’t really a business meeting that kind of turned into something resembling one? Or that laptop you bought for your daughter but ended up using for work
And are these even expenses? Or are they assets?
You could google all the “do’s and don’ts” of what to write off
Just as importantly, how do you know that what you’re finding on Google is correct? Or that you’re googling the right questions?
We hope that you haven’t
That’s why we’re good at what we do, so you can focus on being good at what you do.
It’s a lot easier to avoid these mistakes before they happen, but if you’ve made any of these mistakes (or are
And you can always ask an accounting professional to make sure you are getting the right advice, the best advice, and the support you need to help your business avoid these potentially crippling money mistakes so your business can thrive.