The Top Small Business Financial Mistakes of 2024 (and How to Avoid Them)
The Top Small Business Financial Mistakes of 2024 (and How to Avoid Them)
Small business owners are juggling countless responsibilities, and financial management often gets pushed to the back burner. However, certain mistakes can quietly drain profits and create unnecessary stress. The good news? These costly missteps are entirely avoidable.
Aside from the usual challenge of not keeping up with bookkeeping regularly, here are the top small business mistakes I witnessed in 2024—and what you can do to prevent them.
1. Mixing Personal and Business Finances
Keeping personal and business finances separate is essential for clear bookkeeping, tax compliance, and financial clarity. Open a dedicated business bank account and credit card to streamline financial tracking and avoid issues come tax time.
2. Relying Solely on Bank Statements for Financial Records
Bank statements don’t capture the full financial picture. Without detailed bookkeeping, small businesses miss out on critical insights, deductions, and accurate reporting. Use accounting software like QuickBooks Online to maintain organized, categorized financial records.
3. Misclassifying Employees as Contractors
The IRS is cracking down on worker classification, and mislabeling employees as independent contractors can lead to hefty fines and penalties. Ensure you correctly distinguish between employees and contractors based on IRS guidelines and state regulations.
4. Missing Tax Deadlines
Late tax filings result in unnecessary penalties and interest. Mark all tax due dates on your calendar and set reminders for estimated tax payments, payroll tax filings, and year-end tax returns.
5. Not Saving Receipts or Proper Supporting Documents
Receipts are critical for tracking expenses and defending deductions in case of an audit. Use apps like Expensify or Dext to digitize and store receipts securely, keeping your records audit-proof.
6. Overlooking Subscription Expenses
SaaS subscriptions add up quickly. Regularly review your business expenses and cancel unused or redundant subscriptions to keep costs under control.
7. Forgetting to Save for Quarterly Taxes
Self-employed business owners must pay estimated taxes quarterly. Not setting aside funds can lead to financial strain when payments are due. A good rule of thumb is to save at least 25-30% of your profits for taxes.
8. Overestimating or Underestimating Tax Payments
Failing to accurately calculate tax payments can either leave you with a surprise tax bill or unnecessary overpayments. Work with a tax professional to fine-tune your estimated payments and avoid unpleasant surprises.
9. Recording Income Incorrectly
Deposits in your business bank account don’t always equal taxable income. Loan proceeds, transfers, and refunds should not be categorized as revenue. Proper income categorization ensures accurate financial reporting and tax compliance.
10. Missing Payroll Tax Deadlines
Payroll tax penalties are costly and avoidable. Ensure payroll taxes are deducted correctly and submitted on time by using payroll services like Gusto, ADP, or QuickBooks Payroll.
11. Failing to Track Mileage for Business Use
Business mileage deductions can add up, but many small business owners fail to track their miles. Use apps like MileIQ or QuickBooks Self-Employed to log business mileage effortlessly.
12. Failing to Separate Sales Tax from Revenue
Sales tax is not business income. Keeping sales tax in a separate account prevents accidental spending and ensures you have funds available when it’s time to remit payments to the state.
13. Not Categorizing Salary vs. Distributions Correctly
For business owners structured as S-Corps, incorrectly classifying salary and distributions can lead to tax complications. Work with an accountant to ensure you’re paying yourself appropriately while staying compliant with IRS rules.
←BACK
DON’T MISS THE LATEST POSTS
BUSINESS
How an OBM Can Transform Your Online Business Operations →
PRODUCTIVITY
Why Every Online Entrepreneur Needs an OBM →
TOOLS
Scaling Your Online Business: A Guide to Working with an OBM →
BUSINESS
How an OBM Can Help Your Online Business Thrive →
