5 Cash Flow Mistakes Small Business Owners Should Avoid

Embarking on a new business requires two things for success – time and plenty of cash flow. Dealing with cash flow issues can be difficult when you’re just starting your business, due to considerable expenses and a lack of stable income.

Cash flow is crucial for the first six months of your business. Without sufficient cash to sustain you through this time, your chances of success are low. In fact, many startups failed due to inadequate cash reserves to keep their business afloat.

Fortunately, many cash flow mistakes can be avoided so that you can prevent a cash flow emergency. Keep reading to find out 5 cash flow mistakes you should avoid, so you can properly manage your cash flow.

1. Overestimating your future sales figures

A successful entrepreneur should have relentless optimism – after all, you’re bound to face numerous obstacles and a copious amount of stress. However, optimism should never compromise objectivity, as it could spell danger to your cash flow. Unfortunately, not every potential customer will proceed to make a purchase in the end. As such, it’s vital to conduct realistic and objective sales forecasting based on past evidence and real statistics.

Applying quantitative forecasting methods, you can make use of past revenue data from either your own business or other businesses in your industry as a means of tracking trends and predicting your future sales. This can help you to come up with realistic future sales projections.

2. Overspending during the startup stage

A sound business plan that attracts funding is what all small business owners long to achieve. Unfortunately, once this funding checks in, entrepreneurs may make the mistake of going on a spending spree. While you need to invest money to make money, not all expenses are necessary for your startup. Starting your business will involve plenty of beneficial expenses that boost your company’s profitability in measurable ways. However, many service providers may want to charge you for things you don’t need.

To ensure that you aren’t spending unnecessarily, consider the cost-benefit of all your expenses carefully. Create a realistic budget and stick to it. You can engage the help of reliable accounting services in Singapore to help you keep track of your budget and expenses every month. At Ackenting Group, we can help you to stay on top of your accounting obligations with proper accounting and bookkeeping records. We also offer a full suite of corporate advisory, tax and audit services to help you better manage your cash flow.

3. Being passive about accounts receivables

If you are in the B2B space, watch out for this subtle small business killer – unpaid invoices from clients. As a small business owner, you need to be proactive about collecting payments from your clients, or you could be heading towards a dangerous cash flow situation. Small businesses that don’t impose solid late payment penalties or have collection policies in place are more likely to be taken advantage of. If you have yet to do so, set clear policies with your customers for late payment consequences and penalties.

Create an internal schedule for when you send the initial invoice, when you send payment reminders and when you’ll make phone calls or cut off services for unpaid invoices. You can also benefit from creating incentives, such as discounts for customers who pay early.

4. Not tracking the cash flow

You may have done everything correctly, from projecting realistic future sales to ensuring your clients pay up; but do you track your day-to-day cash flow? Using a cash flow statement will help you to track your revenue and expenses during a specific period of time, such as the holidays. For instance, retail companies may find that cash flow may be tight in the months leading up to the holiday season. You may purchase more inventory to prepare for an increase in sales, but you may find it difficult to pay bills on time if those supplier payments are made before the sales actually happen.

A cash flow statement can help you to foresee when you’ll have more outflow than inflow of cash so that you can plan ahead for those periods. Without tracking your cash flow, you’ll be stuck without knowing whether you’ll have sufficient money when you need it, and you’ll also raise your chances of paying late and facing penalties.

5. Doing it yourself

Taking accountability for your cash flow will demand your time and focus. Many small business owners make the mistake of handling all their financial matters on their own when they’re inexperienced – which can ultimately lead to their downfall.

To avoid this mistake, reach out to a reputable firm that offers accounting and bookkeeping services in Singapore to help you manage your cash flow effectively. As a one-stop corporate service provider, Ackenting Group holds the expertise to understand and meet your business needs effectively. We partner with you to provide a tailored service with innovative solutions to help your small business grow and adapt to changing market conditions.

If you require any assistance on accounting services, feel free to drop us an email at johnwoo@ag-singapore.com or contact us at +65-66358767. At Ackenting Group, we offer a complimentary 30 minutes online consultation for us to better understand your business requirements.


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