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Are you making these cash flow mistakes?

9 July, 2018

Your Business may not be as large in size as to bring you closer to the loss of millions in one go, however, even a small loss in Small-scale Business which is visible through Cash Flow Statement is regrettable. Sometimes, the negative difference in Cash Flow does not draw closer to the mistakes in Business, on the contrary, mistake in Cash Flow Statement. To avoid the following universal mistakes in Cash Flow Statement would not only bring your Business back to the track of profitability but also improve the chances of Business Growth in the long run. Follow up—

To Forecast Revenue via Future Sales Estimation

Forecasting is not forbidden in Business; however, it is a Business ritual at which each Businessman is a pro. Revenue forecasting depends upon the prior experience on the subject of sales in Business. In case, the Business has encountered 30 percent of increment in revenue does not illustrate the probability of nearby increment or revenue in the future as there could be barriers. Alongside, if the Business is new and the Historical Sales Data is not present, forecasting would be the trickiest game for the Businessman to play. It is recommendable to forecast Revenue according to the trends in Market and changing the preference of the customers, which would come out more realistic.

Non-Planned Outflow of Cash

One time investment return could be Luck, however, taking a second shot is undoubtedly Risky. Some Business owners tend to pick the habit of constant investing and let the Business survive upon Investment returns rather than Sales Revenue. In the case of Investments (either long-term or short-term), the outflow of Cash is reckless and goes uncontrollably at a time. A greater outflow of Cash may impact Cash Flow negatively in the long run because the returns on investment would cover the functioning of Business in the form of working capital. It is advisable for each Businessman to spend upon the resource that benefits the Business in the right way.

Overdue Receivables Mismanagement

Overdue Receivables are basically the payments that must have been received by the Business till this time, however, did not receive. An ignorant behaviour of Businessman towards of Overdue Receivables may impact the Cash Flow and create a do-or-die situation for the Businessman as the policy of average debtor period for Australians is rising. In case, you are worried about losing your customer on the subject of insensitive overdue policy akin to a late penalty, you can simply offer intensives or discounts over timely repayment and add terms & conditions that may profit the customer in one or another way. This is the best you can do!

Taxes Mismanagement

Taxes are the mandatory obligations upon Business which undoubtedly make a difference in the profit of the Business earned throughout the year. Mismanagement of Taxes may not look an immense mistake until or unless you are under the obligation to pay added interests and late penalties. More often than not, the history of Tax malfunction create a negative impact upon the Cash flow for a long time as the planned budget breaks, the revenues are used to fulfil tax obligations and further, demolishes the financial plan. It is advisable to seek the assistance of Tax consultants rather than self-managing the Taxes. The term Tax is itself complicated and so does the inflow & outflow in relation to it.

Lack of Cash Reserves

Cash Reserves are basically the invested Cash which is quickly accessible by the Businessman at the times of needful. Cash Reserves may not matter to the Business when enough of working capital and the estimated revenue are inflowing. These Cash Reserves work as interim when there comes a huge lack of working capital in Business. Cash Reserves require long-term maintenance in order to fulfil any immediate requirement of Cash in Business. An instant Business Disaster is effortless to cover in the presence of Cash reserves. Any negative emphasize in the Cash Flow Statement is avoidable through Cash preservations.

Apart from the above mistakes, there are some aspects akin to Hidden Cost in Business, unnecessary expenses, and management of Debts and Credits which influence the mismanagement of Cash Flow in Business. Do your researches before being the Virtuoso of own guidance?

 

Sources: https://www.profitbooks.net/cashflow-mistakes/

http://www.industriuscfo.com/4-common-cash-flow-mistakes-made-small-business-owners/

https://www.sageworks.com/blog/post/2011/06/15/5-Common-Cash-Flow-Mistakes

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