Business Cash Flow Mistakes to Avoid

Business Cash Flow Mistakes to Avoid

Business Cash Flow Mistakes to Avoid

As rewarding as it can be to own and operate a business, there may be times when you hit a financial bump in the road that leaves you wondering what to do next. So often, these types of mishaps occur simply due to a lack of proper financial management. Fortunately, there are several surefire ways to avoid the common mistakes that plenty of small and medium size companies make while trying to grow. By circumventing these common errors, you will begin to handle your business cash flow in a manner that will keep you on the fast track to success.

Failure to Monitor Accounting

Establishing an accounting system is definitely a step in the right direction, however it is by no means the end all be all. Once you have this system in place, the most important part is tracking and analyzing monetary output to get a handle on where cash flows stand. It is important to know where the profits are coming from as well as how much of the funds are going towards expenses. Once you gain a firm understanding of your accounting’s ebb and flow, you can make the appropriate adjustments to improve the business balance sheet.


Unnecessary Expenses

Speaking of expenses, you cannot avoid having them. The old adage having to spend money to make money is true. However, a common reason why many companies experience financial hardship is because of unnecessary expenditures. The biggest superfluous expense of them all is acquiring more personnel than you need at the time. In many instances, entrepreneurs overestimate who they think they need and what salary to give. It is an expensive process to recruit new people, train them, and then put them on the payroll. An effective remedy for this is to outsource those services that are not considered primary daily functions, such as compliance and human resources.


Factoring In Uncollected Funds

When the mission for your business cash flow is to stay on the side of positive, one must be quite careful not to count the chickens before they hatch. In this case, it would be a mistake to count revenue before payments are received. Despite the fact you sent out invoices and are awaiting payments, those funds should not be counted until they have been collected. Customers and vendors are notorious for procrastinating and dragging out pay periods, so those figures you may have calculated into your figures may not even exist. This is when having a system in place to ensure payments are made in a timely manner will come in handy.

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