Common Mistakes that Affect Cash Flow Management
Business management goes beyond simply selling products and making a profit. The continuous selling and buying requires keeping a keen eye on the cash flow, to make sure that more cash is flowing in than flowing out. A short excerpt from an article on SmallBizViewPoints.com clearly illustrates the importance of effective cash flow management.
Common Mistakes that Affect Cash Flow Management
“Cash flow is the lifeblood for small business. Fail to plan properly for the month-end cash flow needs and you will start losing your sleep when the time arrives to write paychecks for employees or to pay vendor bills. That’s why it is very important to keep a keen eye on money coming in and going out, and plan for those times when you will need sizeable cash outflow.”
Here are some of the most common mistakes that can affect cash flow negatively at any point in time, which you would do well to avoid.
Spending more when cash flow is insufficient. If one spends more than what he brings in at any given time, he’ll soon be out of business. Doing so puts any organization in a negative cash flow situation, which is a clear indicator of ill financial health. It can also affect any external investment plan in the long run, as investors would definitely want their money to be put to good use by a business that handles their finances well.
Not hiring smartly. Every businessperson knows how costly hiring a full-time employee is. What if it is done in too big of a hurry? Urgent situations that need additional manpower typically call for a part-time employee, because you can get work done at the fraction of the entire cost. Hiring a full-time employee in such a situation could upset the cash flow, especially if the need is only temporary.
Not negotiating with suppliers. In procuring essential supplies, you should at least try to negotiate a good deal. Even the simplest discounts on both small and large-scale purchases can go a long way towards keeping profit on the bottom line if negotiated properly; but sadly, a lot of businesses usually overlook this strategy.
Spending too much on inadequately planned marketing. Marketing is highly beneficial, especially if done correctly. However, focusing too much of your cash resources on it without sufficient research can be disastrous in terms of not getting a good ROI (Return on Investment), and would be a waste of time and cash flow.
There are still a lot of factors that can have a negative impact on cash flow. Fortunately, such adverse results can be prevented by tools like modern cash flow management software such as the Cash Flow Mojo® Software. It saves you lots of time and eases the burdens of keeping an eagle eye on your cash flow today.
(Source: 7 Common Mistakes that Impact Cash Flow and How to Avoid Them, SmallBizViewPoints.com)
Common Mistakes that Affect Cash Flow Management