|Small Business Guide - Small Business Resources
(Add to Favorites | View All Articles | Resource Directory)
Seven things that will impair your cash flow
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.
Correction: SmallBiz-Gas Prices story - Hickory Daily Record
Small Biz Breakfast on Changing Technology Trends - HamletHub
Small Business Economy Continues To Grow Modestly
Epson Offers Five Ways to Reinvigorate Your Small Business
Small Business Owners Show Significant Increase in Economic Optimism
Small business advice: What to know (and do) about Obama’s cybersecurity proposals
Its Spring - Time For A Compensation Program Tune Up
Now that winter has passed, the annual ritual of spring cleaning is in full swing. Spring cleaning is more than cleaning the windows and clearing the cobwebs that hid in the corners during the winter.
Small Businesses You Can Start in Automotive
There are many choices when thinking about a small business involving your favorite hobby, cars. What about a Mobile detailing franchise? Yes they too are available.
Small Business and Wichita
Owning a small business in Wichita, KS might not be a bad idea, job growth is good, housing has rebounded and the aviation manufacturing capital of the world is on an aileron roll. So consumer spending is up and retail and service sectors are doing fine again.
Site Selection - Slice of Life, A Car Wash and Detail Center DownTown
There is a continual trend we are seeing which I can remember participating in over a decade ago, when cities were trying to figure out how to increase sales tax revenues when the large box stores outside of town came into nearby or surrounding areas. For instance a big and easy example would be Wal-Mart.
QSR Quick Service - Fast Food Restaurants Labor Situation in United States
One of the major complaints in the QSR Quick Service-Fast Food Restaurants Industry is the deplorable Labor Situation. In United States teen labor has become somewhat slim on ethical standards, showing up on time, drug use (both recreational and problematic), work ethic and trainability.
Private Franchising is not Real a Real Franchise
One major issue not being addressed right now in the regulatory definitions which guide consumers and lawyers in business opportunities and franchising is the new term being used; Private Franchising. The Federal Trade Commission decided it would revise its definitions of such opportunities in 1995, but failed to address this issue.
The Role of the Business Model and Strategy for Business
People will always stress that having a well researched business plan is key before you start your business. Although creating a business plan is often an important step in the evolution of a business, particularly if you need financing or you are not experienced at running a business, it is not necessarily the essential first step.
Advertising - For Small Businesses (Part 1)
Is it right for you?If you decide to advertise your product or service then you must ask yourself - "Will potential customers read this publication and will they take action having read my ad?"National newspapers - Read by a huge cross section of the population. If you're inserting a display ad then it would need to be professionally designed and you'd need to be in it for the long run.
The Triple A Way to Spark Your Companys Profits
Winning small and home based businesses today must continually shake things up to stay in the game. Whether it's adding new marketing twists on existing products and services or anticipating customer wants with compatible new items you can add to your product mix, hatching new ideas and concepts is vital to a profitable company.
Franchises Must Meet Legal Definition to be an Actual Franchise
All franchises must meet the legal definition of a franchise no matter what they call it before it is an actual franchise. This is the Federal Trade Commissions take on the franchise rule.
Pressure Washing Aircraft Hangers at the Airport
If you are looking for a way to own your own business using a pressure washer or expand your current pressure washing business you might consider cleaning Aircraft Hangers out at the airport. Why Wash Aircraft hangers? For one it can lead to much more work cleaning all sorts of things at airports which is an encapsulated market.
Tips For Successful Home Show Businesses
Opportunities for home show businesses have never been more abundant. If you're thinking about joining the ranks of those in the many show businesses at home available, use these quick tips to get going.
Business Valuation is Critical
What is Business Valuation? The term business valuation is the method by which the business worth is determined. This usually happens when the business is for sale, when the business is looking for extra funding from the banks, when the business is considering taking on extra investors, or where the business is looking at merging with another organisation.
Finding a Venture Capital Firm
Many ventures are faced with the challenging task of raising venture capital. The first part of this process is finding the right venture capital firm (VC).
Essex Accountant: Accountancy Firm MVP for Your UK Business?
Most business owners know when they need an accountant, but they do not realize how important the task is or how much their results can vary. No other job position outside of your own is going to affect your bottom line like an accountant and contrary to common belief, the job is not just about crunching numbers.
Cost Effective Franchise Regulations, Come again
The Franchise Group at the Federal Trade Commission in all their ego and glory has proclaimed that franchise disclosure laws are "Cost Effective." I hate to break it to the FTC, but your comments and court are completely naked.
Mobile Truck Washing, Case Study
Most folks in the pressure washing business are happier to do business cleaning concrete or flat work, because it appears to be easy. Some do both fleet truck washing and concrete, which makes sense.
Clever business names are usually a mistake
You bet a name is important. Many small business owners try to come up with a clever name for their business rather than one that explains what they do.
Freelance Tips: How to Cope with Spring Fever When Theres Work to Be Done
We all know how glorious those first warm days of spring feel. The trees are blooming, the birds are singing.
How to Avoid the Most Common Reasons for Small Business Failure
The life cycle of the typical small business is short and painful. It starts out with a dream and ends with a whimper.
|Home | Site Map | Privacy Statement | More Articles|