The Worst Cash Flow Mistakes Small Business Owners Make

The worst cash flow mistakes a small business owner can make can be counted on one hand. They have one thing in common, and that is not following the money. It’s all about keeping an eye on the prize, and we review them here, ending with tips on how to keep track of your own business money using small business expense management software …

  1. Don’t think before you splurge. Great! You have started a business. You’re on the road to fame and fortune, and now is the time to invest in an expensive suit and a new car, isn’t it? No, in short, it is not. This is exactly the time to NOT commit money, yours and the company’s, for anything you don’t need. So there is the first lesson. Understand the difference between ‘want’ and ‘need’. To succeed in business you need a phone, but the Armani suit can wait …
  2. Waiting the best. It’s about your financial planning. Understand that you are not going to be a millionaire in the first year. On the contrary, you will do well if you can afford something like a salary in the first year. If you overestimate the number of units you can sell, or the clients you can get to join, then your revenue will be lower than you predict and you may find yourself overloaded with whatever financial packages you have put in place.

  3. Offering credit. Underpaying providers can cripple small businesses. If you have to wait for payment, it’s like offering them an interest-free loan and you shouldn’t. It is perfectly reasonable to request payment in advance, as long as you are ready to fulfill your commitment. After all, you wouldn’t expect the local grocery store to give you a month or more of credit at your grocery store (although if you’re a supplier to them, the boot would be on the other foot). Large organizations generally pay more slowly and also have complex internal procedures for how and when payments can be made. It is better to work with smaller companies, where you have direct access to the person with the power to pay.

  4. Being cash poor. If you’ve made careful and conservative cash flow forecasts in the early days of your business, all is well, as long as the cash moves as you predicted. But what if it doesn’t? If you don’t have a cash cushion, you could be in trouble. Try to have a couple of months of cash in the bank so you can continue if you don’t have any income. It will also help you sleep better.

  5. Don’t have an unpaid financial assistant work for them. I bet it caught your eye, didn’t it? This is not the kind of modern slavery where people work for nothing but technology. It’s all about arming yourself with good quality business expense management software for small businesses and being disciplined in using it. In the early days of your business, you should be especially careful with money, because having little of it usually sharpens the focus on the need to be a good money manager. In later years, when a wedge has been earned, there is no reason to take your foot off the control pedal. Keep a tight grip on finances and you will be rewarded with better dividends in the future. Selecting the right small business expense management software will allow you to track expenses very easily, but more importantly, it will allow you to interrogate the data and show you how effectively you are managing expenses and cost. cash flow, and show where the improvements are. It can be made. And choosing the right package means that it will offer excellent value for money, because the savings you get from using it will likely be more than the cost of investing in it in the first place.

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