How Bad Cash Flow Management Can Break Your Business

poor cash flow management

Cashflow Management is one of the most important factors of a healthy business, but why is it so crucial for businesses to get it right?

Tracking sales and expenses seems simple – however, businesses often don’t realise that they are spending more than they are making. It has been reported that a high percentage of businesses have closed down because they haven’t monitored their cashflow or finances correctly.

The most common ways poor cash flow management can affect your business

Tax Bill Shock

Not preparing for your taxes can end up in an unexpectedly large tax bill.

Stress

The stress from the lack of cash can influence all areas of your life; both business and personal.

Restricted growth

Your business can’t grow if you don’t have the resources to support that growth. Increasing sales is pointless if you don’t have the personnel or resources to service the customers.

Solvency

The extreme cost of lack of cash flow is you going out of business.

How to improve cash flow management

If you are not tracking your income and expenses, you could be losing sight of how your business is actually performing. There are ways to effectively monitor your business cashflow really simply, such as:

Send invoices as quickly as possible

The quicker you send your invoices, the quicker you will get paid.

Streamline your business processes

Think about ways to run your business more efficiently. This can be speeding up or cutting costs on different business processes.

Consider leasing, not buying

Nowadays you can lease almost anything. Consider leasing equipment that isn’t necessary to purchase.

Increase prices

Many business owners are scared to increase prices as it may result in reduced sales. Keep your prices competitive and reward yourself for the hard work that you are doing at the same time.

Cash flow management for small businesses

Cash flow management requires strategic planning and consistent monitoring. As part of our transformational bookkeeping service for small businesses, we can help you keep track of your money coming in and out and ensure your cash flow management is aligned with your financial goals.

Want to see how Wilson Pateras could help you improve your business? Claim your complimentary consultation here or call us on 03 8419 9800. 

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