Even the most driven entrepreneurs can miss hidden opportunities to cut costs, maximize profits and leverage better financial strategies. These inconspicuous missteps can lower your bottom line and inhibit your wealth-building potential. GoBankingRates spoke to financial experts about six common mistakes entrepreneurs should watch out for — and how to fix them.
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1. You Tie Up Cash Flow
One of the biggest mistakes entrepreneurs make is tying up their cashflow.
“Whether it’s making payroll, accounts due, or jumping on an opportunity to expand, cash flow is the lifeblood for any entrepreneur,” said Shalaree Lamboy, wealth strategist for Factum Financial.
She advises business owners to reduce pressure by rethinking where they store cash reserves.
“If your family relies on your business profits to put a roof over their head and food on the table, then dividend-paying whole life insurance can solve multiple problems at the same time.”
Lamboy recommends the following cash flow fixes.
- Set a savings target to increase cash reserves and extend days of liquidity.
- Store accessible cash reserves in a dividend-paying whole life insurance policy designed to maximize cash value.
- Leverage your whole life insurance to retain maximum control over your cash flow.
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2. You Underestimate Employer Benefits
Entrepreneurs have a habit of underestimating the power of employer-sponsored benefits, said Angelo Crocco, owner of AC Accounting.
“Sure, health insurance and retirement matching sound mundane, but ignoring these options is akin to leaving cold, hard cash on the conference table.”
One benefit to consider is a health savings account, or HSA.
“Maxing out your HSA, a powerful, tax-advantaged tool, could save you thousands each year,” said Crocco.
Another strategy he recommends to significantly lighten your tax burden is to utilize flexible spending accounts, or FSAs, to cover dependent care expenses.
3. You Overlook Tax Deductions
It’s surprising how often entrepreneurs overlook tax deductions when it comes time to file. Crocco said entrepreneurs are notorious for overlooking tax deductions because they appear trivial, but he said they can compound significantly over time.
“Think smaller, like home office deductions, mileage tracking, and client gifts. These small expenses accumulate and are fully legitimate write-offs.”
4. You Skip Estate Planning and Insurance
“Entrepreneurs who skip life insurance are gambling with their family’s financial future,” said Crocco. He added that whole or universal life policies can serve as potent tax-deferred investment vehicles while protecting loved ones.
“Combine that with solid estate planning, a clear, regularly updated will and trust structures to minimize estate taxes and shield your hard-earned assets.”
5. You Underutilize Your Accounts
“One common financial misstep entrepreneurs make is underutilizing accounts where investment can be tax-effective,” said Mo Al Adham, CEO and founder of Frec.
Adham said that direct indexing can be a powerful tool, allowing investors to own individual stocks, providing more personalization along with potential tax benefits and greater control over their investments.
“By strategically harvesting tax losses, [entrepreneurs can] offset capital gains and lower their overall tax burden so that more of their money is invested and working for them.”
6. You Don’t Invest in Financial Planning
A financial advisor can review your portfolio and recommend tailored wealth-building strategies that align with your business ventures and family planning. These professionals help their clients develop a customized blueprint to optimize short-term and long-term financial goals, ensuring they’re not leaving any money on the table.
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This article originally appeared on GOBankingRates.com: 6 Signs You’re Leaving Money on the Table — and How To Fix It
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