Cash flow is the lifeblood of a small business, but even the smartest entrepreneur can make some common mistakes.
If your cash flow depends on a high number of invoices, you might be vulnerable to cash flow blunders. It seems as simple as inflow and outflow, but keeping on top of it involves a few tips and tricks.
Here are some of the most common problems most small business owners face when it comes to staying in the black.
Avoid These 5 Major Cash Flow Mistakes
No budget
You would be surprised how many entrepreneurs simply wing it when it comes to finances. If you write down your spending strategy, you’re more likely to stick to it. While it may be enticing to spend on something impulsive, you should check each purchase against your master budget. It will serve as a great guide for as to whether you should buy that new desk or save for a new computer.
Spending too much
It takes money to make money, but being somewhat thrifty can be a boon for business. Make sure your calendar is full before hiring any part-time or full-time staffers, and don’t make any major purchases until evaluating it for its profit-making potential.
Forgetting to save
You can’t foresee the future, so make sure to save some cash to protect your company’s interests. Your company’s savings account could come to the rescue when you need to wine and dine that new client or get hit with an unexpected bill. Keep at least two months of operating expenses on hand.
Getting behind on invoices
Tracking invoices can be tedious, but putting invoices on the backburner can get you in some financial hot water. Make sure your clients are up to speed on your late-payment policies and understand the penalties associated with delayed payments. Try rewarding clients with discounts on goods or services for early payment.
Have trouble with late paying clients? Set up an account with Fundbox to ease the stress on your cash flow statement. Fundbox advances the full value of your invoice and doesn’t interfere with customer relationships. With Fundbox, funds are available in your bank account as soon as the next business day and will cover expenses like payroll and rent while you wait on invoices to roll in.
Forgetting about hidden fees
Do you have loans? Often, lenders will charge you fees when you get advances on your invoices. Some lenders have monthly subscription fees or can charge you to check your credit score. Other agreements require a minimum volume of invoices each month, which might mean paying fees if you don’t hit the minimum requirements.
Fundbox pricing is straightforward, so you can concentrate on growing your business. Registering for a Fundbox account is free, and you can pay the full invoice amount early without penalty.