#1 Reason Small Businesses Fail

small businesses fail

#1 Reason Small Businesses Fail.....

According to the SBA (Small Business Administration), 20% of small businesses fail in the first year with only 33% remaining to hit the 10 year mark. This is an alarming statistic. So why do small businesses fail? There are a multitude of reasons from lack of need for the product, not having the right players on the team, competition and pricing, but….

The #1 reason small businesses fail to make it is due to cash flow problems!!

Now that the cats out of the bag (metaphorically speaking) how do you stop your business from becoming a statistic? 

Here’s 5 strategies to keep your business in the green:

  1. Digitally Store All Of Your Receipts
  2. Use Software to Categorize and Keep Your Expenses In One Place
  3. Have Dedicated Business Bank Accounts and Credit Cards
  4. Connect Your Bank Accounts to Your Software For Automatic Transaction Importing
  5. Review and Categorize Your Expenses Regularly

Let’s dig into these a little bit.

Receipt Storage 

Every expense and purchase made comes with a receipt. Typically business owners shove them in a bag or folder and hand them over to their CPA at tax time. Here’s the problem with this archaic method: Not only can physical receipts get misplaced, you could also be missing out on money saving deductions. It’s 2022 we have cloud storage and phone apps that allow you to take a snap of that receipt and store it.. use them!

Accounting Software

Are you using spreadsheets to track your business financials or, worst case, not tracking them at all.. (we just died inside writing that). Here’s the reality a business that does not track it’s income and expenses is a bankrupt business. Stop it! Businesses are designed to make a profit.

At MVB we recommend and use Xero Cloud accounting software for all of our clients. If tracking your financials seems like a daunting task: Hit the easy button and sign up for one of our monthly subscription plans today and we will take care of the data entry and tracking for you! 

Dedicated Bank Accounts and Credit Cards

We’ve all heard the term comingling of funds. Why is it bad? When you mix business funds with personal funds it becomes extremely difficult to determine what purchases/expenses are business related and which are personal. To keep clean books and records it is extremely important that your business has it’s own bank accounts and credit cards.

If your business is not incorporated that’s ok! Just open a separate personal account and designate a personal credit card for business use only. Note on the credit card usage: Make sure your paying off the balance in full each month! If your business can’t afford to pay to the balance in full then you’re overspending! Need help with auditing your expenses? Click here and we can help!

Connect Your Bank Account to Your Software

This one might seem like a no-brainer, and it is something that is overlooked. Once you have your chosen accounting software set up and those bank accounts established, make sure to connect the bank account to the accounting software. This way all transactions in the bank account will auto import into your accounting software making it easier to categorize the transactions.

Review and Categorize Your Expenses

Categorizing your expenses allows you to see where your business is spending it’s money. This is important because it allows you as the owner to review business expenses and make cuts in areas that there may be more than necessary spending happening. 

These 5 strategies to keep your business from falling into the #1 reason why small businesses fail trap seem easy enough right? Yet, business owners struggle with them every day.

My Virtual BooKeeper is here to help solve that problem. If you want some help getting your business on the right track and becoming more profitable than ever, schedule your complimentary business consultation here to meet with one of our Rockstar MVB’s!

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