As a startup founder, we know that there is plenty on your plate. Managing a new business and preparing it to grow rapidly can often be overwhelming, so it’s good to establish some good habits early on so that your startup can be set up for success.
Here, we’ve highlighted 4 of the most common bad financial habits that startup founders tend to have. By making yourself familiar with these habits, you’ll know exactly how to avoid them, making yourself into a more effective business owner!
Neglecting your bookkeeping
For many startup founders, getting books in order is a pretty low priority. More exciting business functions like fundraising, selling, or investing tend to be the main focus when managing a startup, especially within the early stages. However, bookkeeping is a crucial aspect of running any business. Without proper bookkeeping, all other aspects of the startup are at risk of falling apart. Balanced books are necessary for essential business operations, such as filing taxes or providing financials to investors.
For some founders, bookkeeping can be a complicated or time consuming task. Because of this, it’s often recommended to outsource your bookkeeping or utilize bookkeeping software. With Grasshopper’s Accelerator Startup Checking, you can seamlessly integrate your account into your preferred accounting software, which can help to automate your bookkeeping. With your automated bookkeeping, you focus on other aspects of your startup with the peace of mind that your books are properly balanced.
Not having a good payroll system
Smaller startups with only a handful of employees oftentimes fail to have a proper payroll system in place. This may not seem like an issue initially, but is guaranteed to become a problem when it comes to filing quarterly payroll taxes. Without a payroll system, you’ll likely find yourself having to calculate tax withholding payments by hand, over complicating the process.
To simplify the payroll process for your startup, you should be setting up a proper payroll system with a payroll provider. Providers such as Quickbooks take away the stress of having to do your own calculations, and help to ensure that you’re staying organized.
Mishandling your taxes
Business taxes can be confusing, and mishandling them can lead to big trouble. There are several forms that you’ll need to be aware of as a business owner, and these forms can differ depending on the type of business you’re operating. All of these forms will need to be properly filed and submitted on time. To help you get your business properly prepared for tax season, check out our business tax guide.
To avoid making major mistakes with your taxes, it’s highly suggested that you work alongside a tax professional. If you do choose to handle your startup’s taxes on your own, make sure you’re referring to the IRS Business Taxes Guide to ensure that you’re not missing any vital forms.
Mixing personal funds with business funds
The biggest mistake that a startup founder can make is allowing your personal finances to get mixed up with your startup’s. When you commingle your expenses, you undermine the liability shield that you gain from incorporating. Without this liability shield, you become personally responsible for covering your company’s debts. Allowing your funds to overlap can also make taxes more difficult and may even cause you to owe the IRS more money than expected.
Once your startup is incorporated, you should immediately be opening a separate checking account for your startup’s expenses. This way you can avoid experiencing any unnecessary overlapping of your personal and business funds. Having a separate startup bank account can also gain you access to several financial tools that can help make it easier to operate your startup.With Grasshopper’s Accelerator Startup Checking, you can enjoy many banking features that are catered specifically to startup founders’ needs. Conveniently access financial tools such as bill pay, invoicing, mobile check deposit, and more – available through our online banking and mobile app, whenever you have internet access.
By Michaela Lenahan in Startups
