six Critical Cash Flow Mistakes You Are Making Right Now

Assisting other people with their record keeping has taught me one thing – people are making some serious mistakes with regards to managing their cash flow. And with technology constantly changing, the mistakes are evolving.

No matter how large or little the company, the mistakes are always the same. And with cash flow being the life bloodstream of a business, you have to stay on best of things if you want your business to outlive.

As I have mentioned before, cash flow management is essential because it helps you:

Identify money shortfalls
Provide a glimpse into your client’s financial situation
Track towards your goals
And that’s why it’s so important to do everything you may to avoid these 6 critical income mistake’s. Otherwise you will be just throwing you money away.
Mistake #1 – Uncontrolled spending

I cannot tension it enough – those charge and credit cards that are linked to your business account are nothing but the devil. No seriously having those credit cards makes your life easier when you are making real legitimate business purchases. But when you neglect that those are business funds and use them it for everything from groceries to family vacations, your bank account slowly disappears and your left trying to figure out the way you are going to pay your business expenses.

Error #2 – Not enforcing a collections policy

Now I’m not saying you have to act like a debt collection agency, but you need to have some rules in place for collecting payments that tend to be not received on time. Don’t be afraid in order to call these customers up and ask for your payment if they are more than thirty days behind.
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You have earned to the right to receive that payment. It’s up to you whether you collect it delete word.

Mistake #3 – Jumping the gun on making payments

Your anxious to pay your vendors on time or a vendor just showed up at your door. You don’t want any problems because you may need their services once again. Susie told you that you should have the payment today for the services you provided to her so you go ahead and write the particular check for those vendor bills. You’ve got a receive Susie’s payment. Heard this story before? Happens all the time. You so anxious to pay bills that you simply make payments before you receive money from the customer. This is a recipe regarding disaster because 9 out of 10 times, you will not get that down payment you were expecting. It just does not happen that way. Paying bills too early puts you at risk for returned payments and negative cash flow.

Error #4 – Constant increased payroll

Some industries go through periods if they have more employees on staff than during other parts of the year. The thinking is usually that the increased workload will compensate for the increased work costs. This is not always the case. Spending money and time on unqualified personnel in hopes of training them appropriately ends up costing you more than hiring qualified staff from the start.

Mistake #5 – Not knowing your breakeven point

Your breakeven point is the point at which you profits equal your costs. Anything beyond that is genuine profit, theoretically (see mistake #6). This figure is more often in the form of dollar amount or revenue that should be generated per month. But it can be broken further down into number of clients. Understanding this number will tell you how much business you need to bring in to keep your business afloat, including your owner salary.

Mistake #6 – Poor Project Planning

Poor project planning results in increased expenses which in turn creates a decreased profit. Poor project planning leads to errors and mistakes that your business will have to foot the bill for later. When this particular occurs more often than not, knowing your breakeven point doesn’t matter. The profit that was anticipated will be eaten upward by these unexpected costs.

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