Common Issues Affecting Your Cash Flow Statement

Author: Gina Hall | August 21, 2016

The smartest entrepreneurs still find it difficult to fully understand the intricacies of their cash flow statement. Unfortunately, mismanaged cash flow is one of the leading reasons small businesses fail.

You may have a great platform or widget, but if you can’t pay your engineers or your Wi-Fi bill, you’re doomed. You owe it to yourself and your employees to make sure you have this critical aspect of your company under control.

By keeping on top of a few key issues, you can have your cash flow statement showing a profit in no time. Here are some of the most common problems small business owners face when it comes to staying in the black.

  1. Resisting the urge to spend

    Starting a company costs money, but be extra frugal in the beginning. Make sure your own schedule is maxed out before hiring on any staffers and forgo consultants who take your money and provide little value. Spending money may make you feel like you’re doing something positive, but it can often yield lackluster results. Evaluate each expenditure for its profit-making potential.

  2. Building a budget (and sticking to it)

    Create a reasonable budget and, again, resist the urge to spend. Getting your cash flow statement under control means figuring out when your business will break even and sticking with the plan. Tempting expenditures will always come up, but check each purchase against your master budget. It will provide you with that reality check when you think your company needs a new espresso maker.

  3. Unpaid invoices

    Keeping your company cash-flow positive means making sure your clients pay up. Strict late-payment policies and penalties can help, in addition to internal policies that dictate when email reminders should be sent and phone calls need to be made. Consider coaxing clients with discounts on your goods and services for early payment.

    Most entrepreneurs aren’t in a position to cut a major client who consistently pays late. 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 the next day and will cover expenses like payroll and rent while you wait on invoices to roll in.

  4. Seasonal sales

    Do your product sales peak during a gift-giving season, like Christmas? If you generate most of your revenue at a specific time of year, then you need to strategize how to stretch that through leaner months. Again, your budget should help you resist the urge to spend, and a cash flow optimization service like Fundbox can help fill any gaps that arise.

  5. Creating a cash flow cushion

    You can’t predict the unpredictable, so make sure you have the cash to cover it. Just like your personal savings protects you from unexpected expenses at the dentist’s office or the mechanic, company savings will help you when you need to take an unplanned business trip or get hit with a frivolous lawsuit. It’s common wisdom to keep at least two months of operating expenses on hand.

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