Weslaco Business Owners: Be Wary of These Financial Mistakes

Running a small business is hard enough without having to worry about making costly financial mistakes. But unfortunately, many small business owners do just that. From poor budgeting to inefficient invoicing, there are a number of ways to unintentionally bleed money as a small business owner.

In this article, the Weslaco Area Chamber of Commerce goes over a few of the most common financial mistakes small business owners make. We'll also give you some tips on how to avoid making them in the first place. So whether you're just starting out or you've been in business for years, be sure to read on to avoid making these all-too-common financial pitfalls.

The Mistake of Poor Budgeting

One of the most common financial mistakes small business owners make is failing to budget properly. A good budget is essential for any business, large or small. It not only helps you track your spending and income, but it also allows you to plan for future expenses and set aside money for unexpected costs.

Without a budget, it's all too easy to overspend and find yourself in debt. So if you don't have a budget for your small business yet, now is the time to create one. Not sure where to start? There are plenty of helpful online guides you can follow, or you may want to consider working with an accountant to create your budget.

The Mistake of Inefficient Invoicing

According to PYMNTS, another mistake that small business owners often make is being inefficient with their invoicing. This can take many forms, such as not sending invoices out in a timely manner or not following up with clients who haven't paid yet.

This can obviously lead to cash flow problems since you won't be getting paid for your products or services until much later down the line. To avoid this, make sure you're invoicing promptly and following up regularly with clients who haven't paid yet. You can even automate your invoicing process with accounting software like FreshBooks or QuickBooks.

The Mistake of Poor Inventory Management

If you sell physical products, then it's important to manage your inventory carefully. This means keeping track of what you have in stock, what needs to be reordered, and what's selling well so you can order more of it.

Many small businesses make the mistake of not tracking their inventory properly, which can lead to big problems down the line. For example, you might end up over ordering products that aren't selling well while running out of items that are in high demand. This can obviously hurt your bottom line and frustrate your customers.

To keep this from happening to you, put together a system for tracking your inventory levels and reordering products as needed. This doesn't have to be complicated — a simple spreadsheet will do the trick — but it's important to have some kind of system in place so you always know what's in stock and what needs to be ordered.

The Mistake of Not Structuring Your Business as an LLC

In addition to being committed to sound operational practices, you also need to make sure your company is set up in a way to keep your finances strong. If you are still operating as a sole proprietor, consider forming an LLC, or limited liability company. This entity offers tax advantages. Plus, it makes you a more appealing candidate to loan officers and investors, since your company is legally registered with the state and your personal assets are legally separated from your business. Learn how to start an LLC in Texas and more about the financial benefits of taking this action, and consider working with a formation service if you decide to go this route.

Increase Your Operational Awareness

As a small business owner, it's important to avoid making costly financial mistakes that could hurt your bottom line. The good news is that being operationally aware is a huge first step in staying on track, and you can recruit the services of a professional accountant or use accounting software to help you with many financial best practices. And don’t overlook the impact that your business structure has on your personal and business credibility. By being aware of these pitfalls, you can avoid them altogether.

Weslaco is a fantastic resource for helping you grow your business in our community (and beyond). Join us today!