As small business owners, sometimes we’ll have good days, but sometimes we’ll encounter the stuff of nightmares. I’ll share some business, accounting, and tax horror stories that will surely spook you into learning a thing or two from these mistakes!
Cashflow Conundrums
The first business that my husband and I started failed because of cash flow issues. We ended up creating more of a job for ourselves instead of a business. However similar, not the same. Our type of business was in jewelry design and manufacturing, which was very profitable, but the industry required a 30 to 45 day term for our invoices to be paid, and our vendors and employees required their payment sooner. As we were struggling to keep up, our needs at home were barely being met. Lesson learned: If you want to have a business, cash flow needs to be managed from the start. Know the terms of the industry and make sure your business generates enough to pay yourself a decent salary.
Bamboozled by a Bookkeeper
While finishing my college education, I worked for a local company as a full charge bookkeeper. I discovered that the previous bookkeeper had embezzled over $600,000 during the life of her employment. The lesson here is: while it is good to delegate activities, like bookkeeping, we need to make sure not to relinquish all oversight. You as the business owner need to know and own the finances of your business.
Petrifying Penalties
Another business owner delegated the bookkeeping to a trusted employee that did not know anything about taxes and payroll. This person went almost two years without paying payroll taxes. By the time the owner found out, he was over $200K in debt! Government agencies contacted them nonstop, and hundreds of thousands of dollars were hit with penalties. Lesson learned, If you are going to delegate, hire a professional who is an expert in the area.
Cyber Security Terrors
Nowadays, cyber security is a big scary thing, especially in the financial industry. Recently, a friend of mine told me that she thought that her tax preparer's office had been compromised. The tax preparer had not officially told the clients, even though the law requires full disclosure. In addition to knowing your information being compromised, the scarier thing was the lack of communication between the professional and the clients. Lesson learned: make sure your tax professional goes above and beyond the basic cyber security requirements.
Running a small business is a journey filled with ups and downs. No matter how well-prepared you think you are, unexpected challenges can arise, from cash flow problems to cybersecurity threats. These real-life horror stories serve as stark reminders of the complexities and pitfalls that business owners can face. However, they also offer invaluable lessons: always manage your cash flow meticulously, keep a close eye on your finances even when delegating, ensure your team understands tax obligations, and prioritize cybersecurity at all times. By learning from these cautionary tales, you can equip yourself with the knowledge to navigate your business more successfully, avoiding similar nightmares along the way.
Remember, it's not just about surviving; it's about thriving with the right strategies and mindset in place. Stay vigilant, stay informed, and never let your guard down.
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