7 Cash flow Mistakes That Could Ruin Your Business

A prerequisite to running a business successfully is the ability to manage the cash flow. Every business is made of some key activities that must be efficiently controlled. However, one may have limited time to manage the cash flow due to loads of daily activities in the business.

This is very common in small business, due to the fact that there are lesser team mates that manage the operation of the business. Mismanagement of the company’s fund may lead to the failure of the organization.

To prevent this for occurring, the managers must effectively manage the cash flows to prevent unforeseen disasters. Below are 7 cash flow mistakes to watch out for. They may ruin your business!

  1. Improper management of taxes

Taxes are mandatory payments that shouldn’t be delayed for a long period of time. Failure to pay at its stipulated time can lead to additional fines and penalties. This makes it pertinent for the proper management of the amount to be paid on tax and the period to pay.

Improper management of taxes can lead to several uncertainties, which may have a drastic impact on your business.

  1. Forced growth

Good growth is good for the business but forced growth can affect the business negatively; it spells doom for the business.

Forced growth calls for more salary to staffs, a large office, purchase of new and less important products, and so on. Incurring greater expenses without consideration for the financial budget can severely affect the day-to-day running of your business.


  1. Failure to seek expert help

You would need the financial guidance of experts like Accountants, Bankers, Financial Planners etc. Failure to seek expert help may affect the management of your cash flow. If adequate measures are not taken, this can have a negative effect on the success of your business.


  1. Failure to monitor for fraud

Fraud is a prevalent predicament that affects business. This makes it vital to properly monitor bank accounts, business credit cards and other financial accounts frequently to check for any form of fraud.

Late identification of fraud can lead to the failure of your business. Since embezzlement is a very common crime, it is essential that you manage your cash flow efficiently.


  1. Cost of bad hiring

Some organizations hire staffs from reputable companies. They spend months to train them, with the hope that the staffs become more productive and that they increase sales and revenue to the organization.

After spending months with no sales, they eventually let them go but the managers have lost a lot of money on the course of training and remuneration. Such incident like this can affect the cash flow and lead to the failure of the business.

The solution to this is to come up with better hiring process that will promote the business and lead to its success.


  1. Incorrect calculation of profitability

Investing a lot of money in costs such as renting a big office and buying expensive artworks for the walls of the offices is not necessary if your profit has not reached the mark.

Several businesses assume that there is adequate profit from every transaction they venture into. The truth is that businesses face severe cash problems with too many on overheads.

It is important that decisions are made on proper calculation to cover up for the required profit. When in a tough period, the organization has to face financial problems that may affect the smooth running of the business. Proper calculation of profitability will prevent this crisis.


  1. Miscellaneous hidden costs

Some costs may seem unimportant at first, but an accumulation over the years will affect the running of the organization.

Examples are such insignificant costs are; commercial and legal fees, credit card dues, permits/licenses, insurance coverage, etc.


To encourage the smooth running of your business and success of your organization, it is essential that you avoid these cash flow mistakes.


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