Owning and operating a small business is difficult and time-consuming. How do you manage your finances? Should you hire more employees? What should your management style be?

While the answers to these and all the other questions that arise may depend somewhat on your unique situation, here are some general tips for small business owners, as well as some possible solutions to avoid common pitfalls.

Separate your personal and business finances.

Mingling personal and business finances is a common mistake among small business owners. The idea of “The business is mine. That means the money in the business is mine, so I can spend it however I want” is logical and easy to understand. While this is true in theory, it can also set you up for disaster. The most significant risk is in a tax audit or in the unfortunate event of a bankruptcy proceeding (either business or personal). If the tax authority or the court cannot differentiate between what belongs to you and what belongs to the company, they can just take everything.

If your business is around long enough, an audit becomes an issue of “when,” not “if.” An audit will be much less of a hassle if your finances are separated. With clearly separated finances, an auditor will not have to ask to see your personal bank account information to validate the business’s tax records.

There are two things you should never do.
1.) Never pay a personal expense with a business asset (check, credit card, etc.).
2.) Never pay a business expense with a personal asset.

Suppose you need to use money from the business to buy or pay for something personal. In that case, you should transfer that money from the business’s bank account to your personal bank account and then pay the expense.

If sales are down, and you want to use your savings to prop things up for a bit, do not pay a vendor or business bill from your personal account. Transfer the money to the business’s account, and then pay it from there.

Maintaining complete separation between your personal and business finances also offers you a tremendous advantage in your accounting. It becomes much easier to report what expenses truly belonged to the company on tax returns, loan or permit applications, etc. It also allows quick insight into how much you are paying yourself (and you should be paying yourself!) and how much you are reinvesting into the business.

Know how much money you really have.

Using accounting software can save you expensive bank fees, headaches, and the embarrassment of bouncing a check. A common pitfall for many small business owners is looking at their bank account on the bank’s website and just trusting the balance they see there. It can be easy to look at your bank balance, and say “Oh, I have ten thousand dollars, that means I can order eight thousand dollars in product from the distributor this week.” This mentality is a recipe for overdraft fees and problems because it does not consider that payroll will be coming out of the bank tomorrow, and the rent check you wrote to the landlord has not cleared yet.

The right accounting system will allow you to see what is currently in your bank account, as well as what you have already written out and what you need to be prepared to pay soon. This can help you make better decisions based on your business’s true financial health.

You can choose from multiple different accounting options with costs ranging from free to several hundred dollars per month or more. Take a bit of time to compare and consider what you need. While it can sometimes be true that you get what you pay for, this is an area that it can become easy to overpay for features you do not need (for example, if you are just starting the business and have no employees, you don’t need to be paying for payroll processing). When you start your business, one of the free or low-cost/low-feature options may work well for you, as long as you prepare for the day when your business has outgrown it. While it is outside of this article’s scope to recommend a particular solution, having (and using) some kind of accounting system or software that is more than just a spreadsheet and your checkbook register is vital to the long-term success of your business.

Know when to save and when to spend.

As small business owners, we work incredibly hard for every dollar that we earn. And moreover, we feel every dollar we earn and spend. Knowing how hard you worked can make it incredibly painful to spend that money. It is often wise to question expenditures and price-shop to make sure you aren’t spending more than you have to. Pinching pennies too tightly, though, can cost you more in the long run, especially in terms of time.

As an example: you might save money by handwriting addresses on envelopes for your online sales. But a printer that can directly print to those envelopes will save you a lot of time and hassle (and possibly prevent you from needing carpal tunnel surgery). It would also give you the ability to scale up your online presence to process more sales.

Payroll can be quite expensive, so many business owners resist hiring new employees long past the point when they should. Understaffing can cause you and your existing employees to be overworked, stressed, and unable to complete the work that needs to be done. Try to be objective when considering hiring additional staff, rather than having a reactionary objection to it. Would hiring a new team member (or giving a part-time employee more hours) have an overall positive effect on the business? Keep in mind that an extra staff member may also increase the productivity of existing employees - if someone is overworked and burning out, bringing in some extra help can give them some time to recover and come back fresh. On the other hand, be careful about expanding payroll too quickly if you can automate or streamline the work to make it easier.

Investing in growing your business (like new product lines or even opening a new location) can often yield immediate and visible results. You should also watch carefully for affordable opportunities to invest in maintaining and improving your business. Staffing adjustments and Quality-of-Life improvements for you and your employees - like a new printer or a point-of-sale computer that does not crash as often – can have a more subtle impact. Still, they are investments that should be considered just as carefully as the more flashy growth-oriented investments.

Use multiple bank accounts to organize finances.

It may seem counterintuitive, but having more bank accounts can actually make your finances simpler and prevent costly errors. Some portion of the money that is in your bank account is not yours. If you are in a state that requires businesses to collect sales tax, then some percentage of your daily deposits belongs to the government. Payroll taxes, employee withholdings, and other taxes all represent money that does not belong to you – you are just holding it for someone else. This is especially concerning with payroll taxes and employee withholdings, as the tax code allows the IRS to hold business owners personally responsible for failure to pay these items. It can cause significant cash-flow issues for a business trying to deal with these bills because they are not due as frequently (some payroll taxes are only due once per quarter or once per year, for example).

One of the best ways to pay these bills on time without impacting your other operations is to separate your business’s available funds from the money you are “holding” for others. Consider separate accounts for bills such as sales tax, payroll tax, and possibly even monthly bills like rent. Transferring money to those accounts daily or weekly makes it more difficult to “accidentally” overspend and ensures that you have the cash on hand when the bill comes due. For our business, we move our sales taxes to a holding account daily, rent is a weekly transfer, and payroll taxes get transferred with each paycheck.

Using separate accounts to hold money for recurring bills can help you get a better view of your business’s health. If you break up large bills like taxes and rent and then pay them to separate accounts regularly, it becomes easier to see how well your business performs. Treating large bills like rent, payroll, and taxes as weekly or daily bills can reduce your stress since it provides you with confidence that you have enough money set aside to pay the big bills.

Organize the business you want, not just the business you have.

Take some extra time to think about where you want to see your business in the future. Everything in your store and backroom must be organized somehow (throwing everything on the nearest shelf is technically an organizational system, just not a good one). Sometimes an organization or system that works at a small scale may not work at a larger scale.

For example, if your online inventory is around 100 cards, and sales are averaging 1 or 2 sales per day, then putting everything in a binder might work for you. But if your goal is to get to 10,000 cards in inventory and make 100 sales a day, then at some point, you will have to come up with a different system.

In many cases, it can save you a tremendous amount of time if you implement an organizational system that is easier to scale up as your business grows. Taking a little extra time now could save you more time in the long run, compared to the effort and cost of completely reorganizing your backroom.

Other tips that I have mentioned – like multiple accounts to hold money for large bills - also benefit from this approach. When your business is small, those bills can be easier to manage. As your business grows, it can get harder to keep up with everything. Creating good habits and practices now is easier than changing bad ones later.

Set boundaries with your personal time and resources.

A small business will devour every bit of yourself that you allow it to. As a small business owner, working more than a 40-hour week is generally a given. Still, you need to set some boundaries for yourself and make sure you are taking time away to take care of your mental health, personal relationships, etc. Otherwise, you will burn out.

My business partner is fond of saying, “The work will still be there tomorrow.” When it comes to operating a small business, it is incredibly accurate. There will always be more work to do than time to do it. There will always be an opportunity or an exciting new product that may tempt you to invest more of your personal resources into the business. And after that will come more work and then another opportunity.

You must know when to set limits on your time and resources (both fiscal and mental/emotional). That may mean sometimes missing a sale or letting an opportunity pass by, but it ensures that both you and your business remain mentally, physically, and financially healthy.

Prioritize the customer experience.
51% of people say that a single negative experience means they will never do business with that company again. While it is true that there are some customers who you simply cannot satisfy, you should do everything you can to give as many customers as possible a positive experience. Friendly, knowledgeable staff, a pleasant atmosphere, and even clean restrooms can make the difference between a lost sale and a frequently returning customer.

Since our industry is heavily focused on events, another aspect to consider is how you handle troublesome players. If a player is consistently creating a hostile environment for other players, handling the situation well can instill a lot of positive feelings from the rest of your player base. Even if doing so costs you one customer, it can often generate far more.

Invest in your employees and manage carefully.

When you are hiring, take some extra time to consider your candidates. You are about to trust someone with a portion of something precious to you (your business). Look for a candidate that you feel you can trust with that responsibility.

Once hired, prioritize giving your employees ample training (if you think you have done enough, train a little more). Poorly trained employees can have significant adverse effects on your whole business.

Once your employees are trained, make sure there is a clear set of standards and expectations and accountability for when those expectations are not met. Under-managing can be as dangerous as over-managing or micro-managing. Without enough guidance and accountability, employees will abandon training and do as little as possible. After all, if they perceive that you don’t really care, then why should they? Check-in regularly with your employees, make sure things are done according to the standards and expectations you set. Treat them with respect and show them you value them, and they will return the favor.

Over-managing can be just as harmful as under-managing. Micromanaging is wasteful and destroys employee morale. If you are spending all your time hovering over and micromanaging your employees, that means you are not spending your time doing anything else. The purpose of hiring staff is to be able to get more done. Micromanaging means you are spending twice as much time to get the same amount of work done. It also clearly tells your employees that you do not trust them to do their job.

Finding the sweet spot between under-managing and micromanaging can be difficult. Talk to your employees, listen to their feedback, and try to incorporate it (when appropriate). If you can find the right management balance, the result will be happier and more productive employees and a more successful business.

Ensuring that your business is well organized, especially financially, will help to assure your long-term success. Splitting funds into multiple accounts, keeping your personal finances separate, and ensuring you have sound accounting systems in place will benefit your business tremendously.

Make sure you find the right balance for managing your employees, and be sure to set boundaries for yourself to make sure you don’t end up personally overextended. Ensuring that you, your employees, and your customers are satisfied will guarantee a long and healthy life for your business.