Running a small business is one of the most rewarding things you can do—but it also brings the potential for financial risk.  No matter how great your product or service is, questionable financial decisions could quickly derail even the most promising business.

Some small business owners make the same “reactive” money mistakes over and over, often because they’re too busy handling day-to-day operations to step back and take a strategic approach. The good news? There is room for improvement if you know what to look out for.

Here are five of the most common financial pitfalls small business owners face—and what you can do to avoid them.

1. Mixing Business and Personal Finances

It starts out innocently enough. Maybe you use your personal credit card to cover an unexpected business expense or withdraw a little cash from the business account for personal use. Before you know it, your personal and business finances are tangled together like a bowl of spaghetti.

Why is this a problem?

• Tax complications – Trying to sort out business expenses from personal ones during tax season is a nightmare.
• Legal risk – If you’re operating as an LLC or corporation, mixing finances could weaken your legal protection and make you personally liable for business debts.
• Confused cash flow – When personal and business finances blend, it’s hard to get a clear picture of how much money the business is actually making (or losing).
  

How to fix it:

• Open a separate business bank account and business credit card to keep transactions clean.
• Pay yourself a salary from the business instead of “borrowing” from business funds.
• Use bookkeeping software (like QuickBooks or Wave) to track business expenses properly.
• If you’ve already mixed finances, work with a CPA to clean things up before tax time.

The goal is simple: keep business and personal money separate at all times. It’s not just about convenience—it’s about protecting yourself and your business.

2. Ignoring Cash Flow (Until It’s a Problem)

Most small business owners focus on revenue and profit. But while those numbers look good on paper, they don’t tell the whole story. Cash flow—the actual movement of money in and out of your business—is what determines whether you can keep the lights on.

A business can be profitable and still go bankrupt if cash isn’t flowing correctly.

Signs you have a cash flow problem:

• You’re always waiting on late payments from customers.
• You struggle to cover payroll or rent—even when business is booming.
• You rely heavily on credit cards or loans just to cover routine expenses.
  

How to fix it:

• Get paid faster – Implement clear payment terms, offer early-payment discounts, and follow up on unpaid invoices aggressively.  Use technology:  bill payment services with automated reminders.
• Build a cash cushion – Set aside at least three months (preferably six months) of expenses in a business savings account.  
• Monitor cash flow regularly – Use software like Xero or FreshBooks to track cash flow in real time.
• Plan ahead – Look at upcoming expenses and make sure you have enough cash to cover them before they hit.  

Cash flow issues don’t magically fix themselves. If you’re constantly feeling like you’re just barely keeping up, it’s time to take control.

3. Underpricing Your Products or Services

Your time and expertise is valuable!  One of the biggest mistakes new business owners make is pricing too low. Maybe you’re worried about scaring off customers, or maybe you just haven’t done the math on your costs. Either way, underpricing can kill your business before it even gets a chance to grow.

The reality:

• Low prices don’t always bring in more customers—sometimes they just attract the wrong customers (bargain hunters who won’t stick around).
• Raising prices isn’t as scary as you think—if your product or service delivers real value, people will pay for it.
• Profit margins matter—if you’re barely covering costs, you’re working harder for less money.
  

How to fix it:

• Know your numbers – Calculate the true cost of delivering your product or service, including overhead, labor, and profit margin.
• Look at competitors, but don’t just undercut them – Competing on price alone is a losing game. Instead, focus on the value you provide.
• Test price increases – Many small businesses find that customers are willing to pay more than they expected.

If you’re constantly busy but not making much money, your prices may be the problem. The sooner you adjust, the better.

4. Not Planning for Taxes (Because It’s “Future YOU’s” Problem)

Nothing ruins a good year in business like a huge unexpected tax bill. Many small business owners underestimate how much they’ll owe, forget to set aside money, or don’t plan for tax deductions properly.

Common tax mistakes:

• Not making quarterly estimated tax payments, leading to big penalties.
• Failing to track deductible expenses like home office costs, travel, and equipment.
• Assuming a DIY approach is “good enough” instead of hiring a professional.
  

How to fix it:

• Work with a CPA to estimate taxes and set up quarterly payments.
• Set aside money for taxes every month—don’t wait until the last minute.
• Use accounting software to track income and expenses throughout the year.

Taxes aren’t just a once-a-year problem. Planning ahead can save you thousands and keep your business running smoothly.

5. Trying to Do Everything Yourself

You started your business because you’re good at what you do—not because you wanted to be an accountant, marketing expert, and HR manager all at once. But too many business owners refuse to delegate, leading to burnout, costly mistakes, and stalled growth.

The reality:

• DIY bookkeeping could cost you more in mistakes than hiring a professional.
• Managing marketing without a strategy can lead to wasted money on ineffective ads.
• Trying to “wear all the hats” means you never focus on growing your business.
  

How to fix it:

• Outsource or automate tasks – Bookkeeping, marketing, payroll, and IT support are all areas where professional help pays off.
• Prioritize working on your business, not just in it – Your time is valuable, and you should focus on the areas where you add the most value.
• Know when to bring in experts – Whether it’s a financial advisor, a CPA, or a business coach, getting outside help can save you money (and sanity) in the long run.

Trying to do everything yourself isn’t a badge of honor—it’s a recipe for burnout. Smart business owners know when to delegate.

Final Thoughts: Get Ahead Before the Problems Start

Small business success isn’t just about having a great product or service—it’s about making smart financial decisions. The sooner you get ahead of these five mistakes, the more stable and profitable your business will be.

• Keep business and personal finances separate.
• Stay on top of cash flow, not just revenue.
• Price your products or services for profit, not survival.
• Plan for taxes before they become a crisis.
• Delegate wisely—because doing everything yourself isn’t sustainable.

Avoiding these common financial pitfalls won’t just keep your business afloat—it’ll set you up for long-term success. And let’s be honest, running a business that thrives (instead of always feeling like a financial emergency) sounds a lot more fun.