startup finances

Mistakes This Entrepreneur Made With Her Startup’s Finances (and How to Learn From Them)

Business owners are dealing with unprecedented times right now. Many entrepreneurs are struggling to keep their businesses afloat, with financial struggles as their main priority.

Prior to this crisis, I began thinking about my own company’s finances. I considered myself adequately adept at managing this aspect of my business, but after taking on a new role for a financial tech company that caters to the small business market, I realized I’d gone about everything wrong from the start.

While we’re all in a state of uncertainty, I’d like to share several financial mistakes I’ve made in the past. Hopefully, you can learn from my errors and avoid making them yourself in the future.

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I blew through a $10,000 loan

About five years into running my marketing firm, I was in a tight spot financially, and decided I should take out a loan.

I went through a program that offered financing specifically to women entrepreneursand I received a $10K loan. I had no plan for what I would spend it on, and before I knew it, I was paying back that loan with no clue of what I put it toward.

Hindsight being 20/20 and all, I now know that I shouldn’t have taken out a loan to keep me from business failure. I should have taken out a loan with a specific plan for how that money would be implemented in order to help my company grow.

The lesson for aspiring entrepreneurs: When taking out a loan, know exactly what you plan to use those funds for. The above experience made me shy away from financing in the future. Which leads me to my next mistake…

Related: Dodge These 5 Common Tax Mistakes Entrepreneurs Make

I used a business debit card

After that experience with the loan, I thought I was better off using my business debit card. If I didn’t have the money, I shouldn’t spend it, right?


I’ve since learned that business debit cards are actually not as great as business credit cards for many reasons.

First, should your business debit card get stolen or you become the victim of fraud, there aren’t laws in place to ensure you don’t go in the red covering those faulty transactions you didn’t make. However, credit cards, in general, do offer some protection.

There are also business credit cards that allow you to earn rewards for purchases. It would have been great to rack up airline points whenever I bought printer paper, but alas, I didn’t know.

The lesson for aspiring entrepreneurs: Know the differences (and benefits) to using a business debit card versus a business credit card.

I was ignorant to business credit scores

Did you know that your business has business credit scores? I didn’t.

Just like you have personal credit scores that rate how high of a credit risk you are to lenders, you also have one for your business.

Should you want to open a business credit card or get a business loan, you want to have a business credit history that shows you’ve paid your bills on time and are a low risk.

When I finally investigated my business credit history, it was blank; despite the fact that I’d been in business for 13 years. Up until that point, I had never opened a business credit card or even a line of credit with a supplier that reports to credit bureaus, so my business might as well not exist.

The lesson for aspiring entrepreneurs: Not all business credit scores are created equal, but it’s imperative to know where you rank.

I didn’t set aside money for taxes

Because I chose to pay my business taxes annually, I never bothered to put money in savings to lighten the burden of paying a larger bill all at once in April. So, inevitably, for many years, when my taxes were filed, I kicked myself for having to scramble to find several thousand dollars to pay the bill.

Later, I started using payroll software to pay myself, and that automatically deducted my taxes out, which made it so much less stressful come tax season.

The lesson for aspiring entrepreneurs: It’s essential to set aside money in advance to cover your yearly state and federal taxes.

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What I did right with my business finances

Despite a few learning curves when it came to my finances, I can pat myself on the back for a few good habits I’ve always had.

  • From the start, I had a separate business bank account. I knew that using my personal bank account for business expenses would only muddy the waters and make tax filing a pain. 
  • I used accounting software and regularly monitored my expenses to keep from them from being a big snarled mess at year’s end. I invoiced each client on time so that when I received 1099s from them, everything lined up.
  • I hired an accountant. I’ve always been very DIY when it comes to my business, but paying a few hundred dollars for someone to file my corporation’s taxes, as well as my personal taxes, was such a relief. I never had to wonder if I was screwing something up.

Fortunately, my business (and future businesses) will benefit from my gained knowledge and experience. Hopefully yours will, too!

Originally published March 26, 2020.

Verizon Small Business Digital Ready: A free resource for learning business basics, the latest technology and more.

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