Finance

Running a Small Business? Then Never do These Cash Flow Mistakes

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It takes money to make money and anybody who is running a business would definitely agree to this. You might have risen as a brilliant entrepreneur, running a successful small business.But you will not stay long unless you identify and not follow the common mistakes committed by unsuccessful business owners handling their business cash flow.

Tracking money that is coming in and out is critical and necessary to keep your business sustained to the changing market trends. Only when you get regular payments from customers and other sources, it can be even from the sales, you can make investments. You can purchase latest equipment, hire new staff, or focus on infrastructure improving your business.

In business words, cash flow is the lifeblood of small businessmen. But these stats are showing that people just flying blind running their business and it is depriving them of opportunities. For instance, according to Commonwealth Bank Small Business Study, cash flow remains a stress factor. Their survey showed that 80% of small businesses delay the adoption of new technology due to cash problems despite understanding the long-term benefits.

3 Common Cash Flow Mistakes

Like such, we will find many other factors. Here are the three common cash flow mistakes that contribute to the downfall of a small business.

1. Not Having a Cash Flow Budget

It’s great to work with cash flow budget, but it’s not easy to set up one. Owing to which many small business owners do not create a budget and face cash problems.

When you prepare a budget, a lot of things come into the picture. For instance, you have to look into the statement of cash flow, before you prepare a budget for the future months or periods. The statement of cash flow gives you report on the cash generated and spent during a particular time period. Looking back at your previous account period you can estimate better for future expenditures. Suppose you have major expenses coming up and you have deficient funds, you can plan in advance about managing that cash flow gap.

2. Turning Blind Eye to Late Payments

What’s the main reason you are facing cash problems even though your sale numbers are singing a different tune?

The reason, huge unpaid invoices are eating dust in your cupboard and you are not worried thinking it’s not a big deal. Again, with no inflow of money, you will find yourself in a big trouble when you have to pay for your vendors and suppliers.

You might have given your customer huge, flexible credit terms, but your vendors may not wait very long to you making their payments.

As soon as you sell a product or service, make sure you generate an invoice and keep reminding your customers of the approaching deadline. Use good invoice management software for the job. Offer incentives to clients who pay early.

Unless you do not get paid, it is not possible you can pay your bills or operate your business properly.

Also Read: Best Tips to Consider When Starting a New Business

3. Not Being Realistic about Sale Numbers

You are launching something new and while doing that you have to be realistic about the numbers. You cannot just predict your sale numbers to shoot up just because your competitor had one. Things may fall flat, you can never know.

Suppose you are already running a service then you can estimate the sale numbers keeping your loyal customers in focus.The amount you are going to spend gaining new customers, should not bring you trouble.

If you are launching a new product, make sure your costs are not outweighing your profits. Do a proper market research, be more realistic estimating the sale numbers and adjust your numbers so you don’t spend needlessly.

About Angelina

I am Angelina Jolie as Managing Director of Conext® Card. I have been offering financial services for small business owners and helping them grow into a successful venture.

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About Ajeet Sharma

My Name is Ajeet Sharma Financial Blogger & Founder of Financegab.com. We are a personal finance blog dedicated to personal finance & financial planners. The main aim of this blog is to help people to informed financial decisions.
View all posts by Ajeet Sharma →

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