Tips for Avoiding Financial Pitfalls When Building a Business

It's very easy to make some costly financial mistakes with a startup. In this article, we've compiled the 3 most common mistakes we've seen with early-stage startups.

No clean separation between business and private assets

When private wealth is mixed with company assets, this can lead to problems.

As a rule, the shareholders of a joint stock company or GmbH are liable for the company's assets. This liability protection separates the assets that the company has from the assets that the founder personally has. If the company's assets are mixed with your own private assets, you may lose this important liability protection. In the case of a sole proprietorship, however, the owner is liable with his private and professional assets.

In our experience, the best way for startups to move on is to use one or more corporate credit cards. This is how everyone involved is happiest: This ensures a clean separation between professional and private expenses.

2. Ensuring proper accounting

There are three important reasons why a company needs proper bookkeeping:

For the tax return

It may be necessary, for example, to submit a financial report to a potential investor, landlord or business partner.

Keep track of finances. This can help save money.

While the first two points are self-explanatory, many underestimate the value of the third point: We often mistakenly overlook double fees or unnecessary expenses. If you correct that, you can save a lot of money.

3. To keep the accounts yourself

Many people make this mistake when starting a business for the first time. At first glance, it doesn't seem like a big burden to keep the financial records for the company, and you can see for yourself that being closer to the details of the company helps you. Unfortunately, the reality is that maintaining high-quality bookkeeping reliably takes a surprising amount of time and is not the best use of time. Even if the founder is an expert in this field, it is a burden, which is why even full-time financial professionals tend to hire an external accounting firm to do the daily bookkeeping. A good accounting service provider ensures that the process runs the way you want it and saves you a lot of time and frustration.

conclusion

In the exciting world of starting a business, there are many pitfalls to avoid, particularly in the financial sector.

The clean separation between business and private assets is crucial to avoid legal problems.

Proper bookkeeping is not only important for tax returns, but also for the trust of investors, landlords and business partners. It also helps to keep track of finances and save money.

After all, trying to do the bookkeeping yourself can be an expensive mistake. The time and energy you spend doing so could be better invested in developing your business. Working with a professional accounting service provider can save you time and frustration.

How can Numarics help?

At Numarics, we are happy to help you set up a business and make strategic decisions. We help you avoid financial pitfalls and pave the way to success.

At Numarics, we are happy to help with Starting a business as well as when making strategic decisions.

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