Avoid Making These Common Cash Flow Mistakes
As the cost of living crisis continues to impact our business throughout the UK, and energy costs surges month after month, we can understand the difficulties of running a business during the current climate.
In this article, we’ll define the term ‘Cash flow’, what it means and why it’s so important. We’ll also identify some of the most common cash flow mistakes and highlight some of the ways you, as the business owner, can avoid encountering them.
What is Cash Flow and why is it so important for my business?
The quantity of money coming into and going out of your business during a specific time period is known as cash flow.
Cash flow is crucial because it makes it possible for you to both fulfill your current financial responsibilities and make plans for the future. If you don't handle this aspect of your business properly, you may not be able to operate the business smoothly in the future.
What are the main common cash flow mistakes and how can I avoid making these simple mistakes?
Business owners sometimes have little time or money to devote to allocating resources toward monitoring their cash flow since they are focusing on a variety of essential business tasks which could mean that you have neglected to focus on proper management of your business’ cash flow.
Forcing expansion, underestimating earnings, failing to plan adequately are just some of the more typical errors that can result in cash flow problems. Here are a few more you should be aware of:
Failing to keep track of your financial statements
If you don't routinely review your financial accounts you run the risk of misinterpreting the development of your companies and making poor judgments.
Be honest with your sales estimates, and if you find that you were significantly off course after a few months, go back and revise your goals.
Not setting a realistic budget
Financial stability is facilitated by a budget. A budget makes it simpler to pay bills on time, accumulate an emergency fund, and save for significant cost by keeping track of spending and sticking to a plan.This could potentially enable your business to limit irrational spending on non-essential items as well.
Poor credit management
One of the main reasons for inadequate cash flow is unpaid bills. Your employee salaries, or business expansion will not be aided by money that is in your customers' bank accounts. Make sure you have solid procedures in place to guarantee clients understand your payment conditions and pay you on time.
Having no cash flow projection
Many business owners do not understand the value of a cash flow projection. Understanding when cash flow may decrease can be quite beneficial, both psychologically and financially.
How can PSP help?
Here at PSP, we strive to provide greater value to our clients by providing the most effective structured business solutions to towns, cities, local authorities, and BIDs across the UK. We have designed quality Place programmes with the aim of delivering quality support and advice for businesses to grow and become more sustainable.
We have launched many Business Health Clinics with the aim of reaching out to local businesses and providing essential advice on how to make substantial savings on their telecom, merchant, insurance and energy bills.
If you would like to speak to one of our savings experts, please call us on 0333 0156 289. Alternatively, you can send us a copy of your bill to firstname.lastname@example.org where we will then proceed to review.
Stay updated with our news by following us on our socials as well!