The company’s financial health begins and ends with cash flow. This is nothing new for any manager, administrator, or accountant – or at least it shouldn’t be.
However, even when the company regularly monitors its cash flow and makes decisions based on it, certain very common mistakes can compromise your entire business. Below mentioned are some common problems and their solutions!
1) Not tracking cash flow daily
It’s a matter of habit and essential to completely control your business. So, if the accounts don’t close or if the company has problems, turn to cash flow.
It is possible to monitor it in many ways: through spreadsheets, applications, and complete management software available on the market (and which are highly recommended). The important thing is to do all the recordings and closings daily.
The idea is to have full control of how much you will receive, how much you have to pay, and your profits. And with that, you can make more assertive decisions about your business.
2) Don’t focus on sales
A company that doesn’t manage its cash flow well may not realize that sales are down. They are responsible for the values that enter your business every day. If they are in decline and you don’t have the right cash control to know about it, it will be difficult to keep the business sustainable and it could be in serious trouble.
The first step, as said, is to optimize daily cash flow control. The second is to analyze how your sales are going and create strategies to increase them. The third step is to create a plan B to face more aggressive or crisis contexts. Boosting sales directly affects your company’s finances and is a routine task.
3) Spend more than you earn
This is a classic mistake, even more so when the manager does not consider cash flow when making new expenses. It is necessary to balance the company, and control expenses well so that expenses do not exceed the gains, that is, accounts payable exceed accounts receivable.
4) Lack of planning
A very important resource that combines with cash flow is constant and strategic planning. These are tools that must have a symbiosis for the company to function properly. There is no point in having a well-controlled cash flow if there are no defined goals. It’s no use having goals and an incredible plan for your business if the cash doesn’t allow you to put it into practice.
The tip is to create strategies for your sales and make predictions based on your business numbers. For example, how much would you earn selling more units at lower or higher prices, in a given time, considering expenses and costs, and see if this amount will be enough to guarantee a good income at the end of the month and the achievement of goals?
5) Lack of inventory control
The lack of inventory control can generate cash flow problems and all business processes. If the company’s demand grows and its inventory doesn’t keep up, it will have fewer sales than it could have, it won’t be able to take advantage of opportunities and it will still lose profit margin. And excess inventory can mean lost money and waste.
There are many ways to monitor inventory, including in real-time, and still keep it in line with cash flow at different times of the year.
With these small tips, it is already possible to avoid complex mistakes regarding cash flow and also regarding the health of your business as a whole.
This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.