The particular worst cash flow mistakes a small business owner can make can be counted on one hand. They have one thing in common, and that’s about declining to follow the money. They’re about keeping your eye on the prize, and we go through them here, ending with advice about how to track your own business money using expense management software to get small businesses…
Failing to think before you splurge. Great! You’ve started a business. Occur to be on the road to fame and fortune, plus now’s the time to invest in an expensive suit and a new car, isn’t it? No, in short, it isn’t. This is exactly time NOT to commit money – yours of the company’s – to whatever you don’t need. So there’s the first lesson. Understand the difference between ‘want’ and ‘need’. To succeed in business you will need a phone, but the Armani suit may wait…
Expecting the best. This is about your financial planning. Understand that you’re not going to be a millionaire in the first year. On the contrary, you’ll be doing well whenever you can afford to pay yourself anything like a salary in Year One. If you overestimate the number of units you can sell, or the clients you can get to come on board, then revenue will be lower than a person predict, and you may find yourself overstretched with any finance package you’ve set up.
Offering credit. Poor paying suppliers can cripple small businesses. If you’re made to wait for payment, that’s like providing them an interest-free loan, and you shouldn’t do it. It’s perfectly reasonable to ask for payment up front, so long as occur to be ready to honour your commitment. After all, you wouldn’t expect the local grocery store to give you a month or more’s credit score on your grocery shop (though if you are a supplier to them, the boot would be on the other foot). Generally, large organisations are slower payers, and also have complex internal procedures in position about how and when payments can be produced.
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Better to work with smaller companies, to have direct access to the person with the power to pay.
Being cash bad. If you’ve made careful and conventional cash flow forecasts in the early days of the business, everything’s fine, so long as cash moves as you’d predicted. Yet what happens if it doesn’t? If you have no cash cushion you could be in trouble. Attempt to have a couple of months-worth of cash in the bank so you could carry on if you had no income at all. It can be heading help you sleep easier, too.
Not making an unpaid finance assistant work for them. Bet that caught your attention didn’t it? This is not about the kind of modern slavery that has people working for nothing, but is actually about technology. It’s about arming yourself with good quality business expenditure management software for small businesses and getting disciplined in its use. In the beginning of your business you need to be especially cautious with money, because having little of it generally sharpens the focus in the need to be a good money manager. In the future, when you’ve earned a sand wedge, there’s no reason to take your foot off the control pedal. Keep a tight rein on finance, and you’ll become rewarded with better dividends later on. Selection of the right small business expense management software will enable you to keep track of expenses simply, but more importantly, it will allow you to interrogate the data, and show you how effectively you’re managing spending and cashflow — and show where improvements can be produced. And picking the right package means it’ll offer excellent value for money, since the savings you make by using it are probably going to be more than the cost of purchasing it in the first place.