Costly Mistakes You Make In Managing Your Cash Flow

Costly Mistakes You Make In Managing Your Cash Flow

A robust cash flow is a strong indicator that your business is on the right track. However, cash flow problems are all too common and one of the main reasons some businesses fail. Find out what these cash flow errors are and how they can be avoided. 

Untimely payment of accounts receivables

Accounts receivable is a good sign for businesses because it means that money will come in. Unfortunately, you still have to collect accounts receivable before you can treat it as profit. When expenses arise, you may even end up short. This is the most common cash flow problem that can become a patter if left unsolved. Past-due payments must be collected to prevent cash flow problem. A clear guideline regarding the consequences for late payments must be put in place. You will also need to a clear workflow that will enable you to keep track of invoice issuing and checking customers who not making a payment in a timely manner. 

Unmonitored expenses

No matter how busy you are, you need to take the time to review your expense sheet. Are there any unnecessary expenditures? You will need to trim them as they ruin your monthly budget. Being attentive will can prevent you from committing any costly mistakes. Record-keeping helps you determine whether or not you are overspending. Monitoring your expenses also help ensure that your taxes and debts are paid. 

Miscalculating the cost of business growth

It is not easy to run a business let alone growing it. While growth is a sign that your business is starting to prosper, growth can be expensive and if you do not have a financial management strategy in mind, everything will fall to pieces. Planning in advance ensures that your business will be in the right direction. Operational mismanagement can also hurt your cash flow.If you want to optimise your customer service, make sure you have long term solutions. Avoid spending spree and while a growing company requires extra help, you will still have to keep an eye on your spending habits. Although you want to grow your business, it should continue to operate on minimal expenditures. With this practice, you are guaranteed of a healthy financial state. 

Setting unrealistic expectations

Most businesses believe that receivables come in constantly, and by embracing this concept, many businesses find themselves in serious trouble. While you cannot predict the future of your business, you can still control the direction it will take. There is nothing wrong with being optimistic about growth rates, but make sure these numbers are translating properly. 

Tamara Deterding

Written by : Tamara Deterding