Are you a Texas trade professional struggling to keep your finances in order? Whether you're a plumber, electrician, carpenter, or general contractor, fluctuating income, unpredictable expenses, and the constant need for reinvestment can make financial stability difficult. It's easy to make financial missteps that keep you struggling. Here are five common financial mistakes that might be holding you back—and how to avoid them.

1. Mixing Personal & Business Funds

One of the biggest financial mistakes trade professionals make is not separating personal and business finances. A U.S. Bank study found that 82% of small businesses fail due to poor cash flow management, which includes disorganized financial records. When you mix funds, it becomes difficult to track expenses, manage cash flow, and accurately file taxes. Without clear financial separation, you risk overspending, underreporting income, and even facing IRS issues. The solution? Open a dedicated business account and use accounting software to keep transactions organized.

2. Not Setting Aside Taxes

Unlike salaried employees, trade professionals don’t have taxes automatically deducted from their income. The IRS reports that nearly 40% of small businesses incur tax penalties due to underpayment or mismanagement of estimated taxes. If you're not proactively setting aside money for taxes, you could find yourself in financial trouble when tax season arrives. To avoid unexpected tax bills, set aside at least 25-30% of your earnings in a separate account dedicated to taxes. Consider working with a tax professional to estimate your liabilities and stay compliant.

3. Ignoring Emergency Funds

Inconsistent income is a reality for trade professionals, and failing to build an emergency fund can lead to financial hardship. According to a Federal Reserve survey, 36% of small business owners would have difficulty covering a $5,000 unexpected expense. Without a safety net, a slow season or unexpected expenses can leave you scrambling. Aim to save at least six months’ worth of expenses to cover any financial gaps and give yourself peace of mind.

4. Underpricing Your Services

Many trade professionals set their prices too low out of fear that higher rates will drive away customers. However, undercharging can significantly impact profitability and make it difficult to sustain a business. Research shows that many small service-based businesses struggle financially because they fail to price their services appropriately. Instead of undervaluing your expertise, take the time to analyze industry standards, factor in all costs—including labor, materials, and overhead—and establish competitive pricing that ensures long-term financial stability.

5. Failing to Track Cash Flow

Managing cash flow effectively is crucial for the success of any trade business, yet many trade professionals overlook this aspect of their finances. Without a clear understanding of income and expenses, it becomes difficult to cover costs, pay yourself, or reinvest in your business. Failing to track cash flow can lead to unexpected financial shortfalls, making it harder to stay afloat. To avoid this, consider using bookkeeping software or working with an accountant to monitor your cash flow and ensure financial stability.

The good news? Kraftworks has the solution to help trade professionals take control of their finances. Stay tuned for more details on how we can help you manage cash flow effortlessly and keep your business running smoothly!

Fix Your Finances—Check Out Our “Managing Cash Flow” Webinar Recording below!