The AICPA‘s Journal of Accountancy ran a short but excellent article today noting the six most common financial mistakes that clients make:

1. Miscalculating startup costs or personal funds.
2. Failing to plan and project.
3. Buying unnecessarily.
4. Failing to analyze all revenue streams.
5. Ignoring the human element in mergers and acquisitions.
6. Delaying a succession plan.

They stress the importance of having a proactive approach, involving proper management training — rather than procrastinating, overreacting, or calling their CPA in a panic when facing over-extension, employee problems, customer losses, or even bankruptcy.

With small businesses, we see these issues regularly, but especially the first two, which are intrinsically related — miscalculating or underestimating startup costs is the number one mistake we see clients make when starting a business, and going into operations under-capitalized is a harbinger of difficulties to come. However, with more planning and projection (second on the above list), one can come much closer to an accurate estimate of startup costs — we always recommend working with a professional to create fluid forecasts, “what-if” projections, and “worse-case”/”best case”/”expected” scenarios.

Source: 6 common client financial mistakes – Journal of Accountancy