Making smart financial decisions early on is the key to getting your business to a positive cash-flow point. Cash flow is crucial to the smooth running of your business, and in some situations, its ultimate viability.
Here are 4 cash flow mistakes that you should avoid.
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1. Impulse Spending
In everything that your business buys, you should ask yourself, “Do I really need it, and can I get it cheaper?” If you take some extra time to hunt out other options while keeping a save-money mindset, you will not only reduce stress for your business but also build your savings and resources even faster.
2. Giving Credit To Customers Who Are Too Big A Risk
When you offer credit to customers who are too big of a risk, you are putting your business at risk. For example, if you give a credit to a customer so they can pay their bill in the future, you’re leaving the door open for your business to fall into debt. Especially if your product has a high cost of goods sold, then the impact of debt will be greater.
3. Paying Invoices Before They Are Due
Sometimes, when business is going well, you may want to pay your suppliers’ invoices right after shipment or pay other expenses before they are due. This is a poor use of money, and it can affect your cash flow immediately. This could be due to a fear of running out of cash or anticipation of financial pain points. However, you should find a cash flow system and strategy that will keep your bills paid but also leave you with enough cash reserves to maintain your business.
4. Stocking Up
Buying too much stock or supplies can starve your business of cash. Find a process that monitors how much stock is being used and where it’s moving, so you’re not just buying supplies, adding to the stock, and losing cash in the process.
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Kommas with Kelle Can Help
If you would like more tips and assistance with your business cash flow, we can help! At Kommas with Kelle, we offer Bookkeeping & Accounting Services to small and medium-sized businesses. Contact us today.