Home
>
Small Business
>
Do You Make These 7 Deadly Cash Flow Mistakes?

Do You Make These 7 Deadly Cash Flow Mistakes?

Managing cash flow is every small business owner's most important function. Avoid these seven deadly mistakes to make sure you aren't creating cash flow problems in your business.

1. Using the "Fly By The Seat of Your Pants" Accounting Method.

When tax time rolls around do you find yourself pawing through piles of paper on your desk looking for credit card receipts from your business trip? Or are you upside down digging under the seat of your car trying to figure out where all your gas receipts are? Are you wondering if that coffee stained piece of paper is an invoice from a supplier? Do you have a vague feeling that someone, somewhere owes you money but, you just can't remember who it is? If so, you're probably guilty of operating with the "Fly By the Seat of Your Pants" accounting method.

Using this accounting method has a tremendous impact on your business's cash flow. Unless you have a system to track your business finances, you'll always be operating in the dark and in danger of imitating George of the Jungle as he slams into a tree.

2. Not Knowing What the Numbers Are All About.

Once you have a real honest to goodness useful accounting system that's where the real fun starts. You've got a bunch of numbers but what in the world do you do with them?

Understanding what the numbers mean is crucial to your cash flow. Are sales trending up or down? Are expenses rising faster than sales? Is one product more profitable or better selling than another? How much do I need to sell to meet expenses each month? Can I take a paycheck this month? The answers all lie in the numbers.

3. Mismanaging Credit: I Owe You, You Owe Me.

There are two ways to mismanage credit in small business:

1. Granting credit without wise credit policies

2. Using credit with no plan of how to pay the bill.

Both have a huge impact on your cash flow and are often closely related. Here's a scenario to demonstrate that point. You have an opportunity to work on a big project but to do the project you need to order materials. So, you order materials from a supplier who expects payment in 30 days but you won't receive cash for the project for 60 days (or 90). Immediately you've put yourself into a cash flow crunch that could take months or years to recover from financially. In the meantime you've passed on smaller jobs that would have provided quicker cash at less cost. And, if you're not able to come up with the cash for your supplier, you've endangered that relationship as well.

4. Ignoring the relationship between Receivables and Payables.

Do your Receivables and Payables "play nice" with each other? In a perfect world your receivables (what customers owe you) would be paid just in time for you to pay your payables (what you owe your vendors). But, if you're a small business owner you know Rule #1 is "Stuff Happens". The customer you thought would pay his bill this week, doesn't. So the bills you thought you could pay this week, don't get paid.

Are your Payables in balance with you Receivables? If what you owe to others is far more than what is owed to you, then, Houston, you have a problem.

And it's not just the balance that's important, it's the quality as well. If your receivables are as old as your Aunt Tilly, chances are good you'll never see the cash.

5. Focusing on profit instead of cash flow.

Ahh, Profit. The ultimate goal of every business. Or is it? Did you know that many businesses that fail are operating at a profit? How can that be? For the small business, cash flow is the ultimate goal. No cash flow. No business. Period.

What's the difference? Mostly the difference is in the decision making process. "If I take on this big job, it will earn me a huge profit, but if I take on five smaller jobs, I'll have cash to pay my bills." Yes, you want to be profitable but every decision has to be measured against the effect it will have on cash flow.

6. Forgetting your debt to society.

Some bills are easy to forget. Bills like sales tax, payroll taxes, estimated taxes. They sort of sit out there, almost off the radar screen. They don't have to be paid right away. It's easy to forget them until BAM! they're due and they're due right now. And you better have the money to pay them or you're in hot water with the Tax Man. That's not a place anyone wants to be. Pay them late or not at all and you end up with penalties and interest on top of what's already due. Cash flow problems result as you rob Peter to pay Paul. It can take months or even years to recover.

7. Spending your company's future on a speed boat.

Haven't you always wanted a speed boat? Or a fancy car? Or an all expense paid trip to the Bahamas? It might be tempting to try to pass your personal purchases off as tax deductible business expenses. But, it's a bad idea for two reasons.

The folks who work at the IRS are over-worked but they're not stupid. The last thing you need is an audit. An audit that could reveal your transgressions and could result in an unexpected tax bill plus penalties and interest. Again, huge cash flow headache!

Here's the other reason it's a bad idea. Are you spending your company's future on frivolous or unnecessary expenses? Small businesses operate close to the edge. Unless you have a reserve to see you through the tough times, you're always in danger of being on the wrong side of that edge. You've got to take care of the golden egg laying goose first. Then, you can pay yourself a properly taxed bonus and buy all the toys you want.

Learn cash flow secrets from the Cash Flow Master. Sign up for a free mini course from veteran small business consultant, Caroline Jordan MBA. Visit http://www.thejordanresult.com/mastering.html and start learning the keys to good cash flow management today.

Airbnb cleaning service Glenview ..

In The News:

Apple releases emergency patches for two zero-day vulnerabilities actively exploited in attacks. iPhone and iPad users urged to update immediately.

DoorDash launches Zesty, an AI-powered social app that recommends restaurants through conversational search, now testing in San Francisco and New York.

Cybersecurity firm Infoblox reveals that over 90 percent of parked domains now redirect visitors to scams and malware, making simple typos extremely dangerous.

The Fox News AI Newsletter covers the latest artificial intelligence technology advancements, including the challenges and opportunities AI presents now and for the future.

GPT-5.2 is now live for all ChatGPT users with improved coding, writing and image interpretation, with Kurt Knutsson offering his review.

New iPhone replacement scam uses pressure tactics and fake carrier calls to steal devices from buyers. Criminals claim shipping errors and demand urgent returns.

Amazon Ring's new facial recognition feature sparks privacy controversy as Electronic Frontier Foundation critics argue the AI upgrade expands surveillance risks.

New Android banking trojan Sturnus steals credentials, reads encrypted messages and controls devices.

Denmark's 3D-printed student village proves automation builds 36 apartments faster than traditional methods. Skovsporet project shows housing future.

Discover Android's new Sound Notifications feature that alerts you to smoke alarms, doorbells, and baby cries even when wearing headphones.

New SantaStealer malware reportedly threatens holiday shoppers with password theft. This Christmas-themed info-stealer targets browsers and crypto wallets.

The Christmas season brings a surge in Netflix phishing scams targeting shoppers with fake emails. Stacey P received convincing scam but verified account first.

San Francisco Giants invite Jamie Grohsong to throw ceremonial first pitch at Oracle Park after he learned to play baseball with a bionic hand following an injury.

FBI warns cybercriminals are stealing family photos from social media to create fake proof of life images in virtual kidnapping scams targeting victims.

Instagram's new 'Your Algorithm' tool lets you control your Reels feed in real time. The app now gives you power to customize what videos you see.

Major Marquis fintech breach exposes 400,000-plus Americans' data through unpatched SonicWall vulnerability, with Texas hardest hit at 354,000 affected.

Free up iPhone storage fast by clearing large photos and videos from Messages app. Simple steps for iOS users to delete attachments without losing chats.

Scammers are flooding inboxes with fake tracking alerts that mimic real carriers, exploiting the holiday rush to steal logins and personal data.

The Fox News AI Newsletter brings you the latest news on AI technology advancements and the challenges and opportunities AI presents now and for the future.

Texas family reunites with missing 11-year-old cat Grayson after 103 days using Petco Love Lost's AI photo matching technology and community help.

Tired of AI customer service loops? These insider tricks help you escape "frustration AI" and get real human help when you need it most for urgent issues.

Unlock richer audio from your streaming apps with simple tweaks to volume normalization, equalizer settings, and quality preferences for cleaner sound.

Scammers are sending fake Facebook settlement payout emails that mimic legitimate notices from the privacy settlement administrator to deceive users.

Holiday shopping scams surge as fake refund emails target distracted consumers during Black Friday and holiday seasons, costing Americans billions annually.

The AI-powered IRMO M1 exoskeleton features four modes, including turbo, eco, training and rest for hiking, running, cycling and sports with eight-hour battery life.

Do You Make These 7 Deadly Cash Flow Mistakes?

Small Business