4 Common Cash Flow Mistakes Small Businesses Make

No matter what stage or level of success your business is in, it won’t go far without strong cash flow management. And, in the midst of COVID-19, cash flow has never felt so important to small business sustainability and survival.

At SBS Accounting & Advisors, we see a lot of small business owners struggling in this area, having trouble comprehending it or sometimes not even addressing it. This can send a business spiraling downward, or at the very least, keep it from growing. And, the numbers across the board back this up – 82 percent of startups and small businesses fail due to poor cash flow problems and understanding, according to a U.S. Bank study.

Don’t worry! Our team at SBS specializes in helping transform your cash flow to ignite powerful results and growth – being your trusted advisor every step of the way. Before getting into the weeds, though, I feel it’s important to provide some background on common cash flow mistakes small businesses make, so that you know what to look out for and act upon.

Here are 4 common cash flow mistakes that small businesses make:

1. Lingering Unpaid Invoices 

Getting paid for your work keeps your small business alive. Getting paid on time gets you the cash flow you need to plan for your future, make key purchases and grow your business.

But, that’s easier said than done – and a common issue we see among small businesses. Chasing down payment can be challenging because you might worry about setting the customer off, and risk losing their business or fracturing your relationship.

At SBS, we’ve spent years helping our clients navigate through these difficulties. We make sure you get the apps, tools and advice you need to get paid on time and grow your business. Then, we will implement them into your workflow so that you have the cash flow you need – when you need it – to take your business to the next level.

2. No Budget in Place

As a kid, your parents may have told you to budget. If it went over your head or weren’t mature enough to keep yourself from buying the things you wanted, that’s more than understandable. But, whether you knew it, that life lesson manifests itself in adulthood when running a business.

Small business owners sometimes have the same problem – only on a much larger scale that has a bigger impact on their lives. That’s because spending out of control, or not having a plan in place for the future, can send a business spiraling down.

At SBS, we see this all the time. It’s so important to know where your business stands, and budgeting and projecting allows us to take your historic financial data to help plan for your future and grow your business. For example, in addition to helping you prepare a budget, we’ll provide you with a budget vs. actual report on a monthly basis to help you track your performance against your goals. After all, you can only spend what you can afford, and it’s our obligation to make sure you strategically plan your spending to generate success and stay in business.

3. No Rainy Day Savings Cushion on Hand

No matter how ironclad your budget may seem, there will always be life events or circumstances that get in the way, such as COVID-19. That’s why it is so critical to have a savings cushion on hand to help you get through these unforeseen moments.

It’s always smart to have at least a few month’s worth (an average is three months) of operating expenses in this savings account. If you currently don’t have this set up, or want to increase your savings cushion, don’t hesitate to reach out to us today. You must be prepared to weather the storm.

4. Overestimating Future Business/Sales

As small business owners and entrepreneurs, optimism can be a great asset. But, at times, it can also be a hindrance.

Take, for example, overestimating future business/sales. When we count on, or overestimate, sales coming through in the future, we tend to overspend in the present. This can create a cash shortage problem that hurts your business.

At SBS, we study key performance indicators (KPIs) and other data to make sure that you have an accurate financial picture of your finances and can plan for a successful future. We also break down your financial fluency – what your numbers mean and how they impact your growth. That means going over your income statement, cash flow statement and balance sheet to help you understand where you’re at and get you to where you want to go.

Bottom Line: Cash Flow is King, and We’re Here to Help!

While these are just a few of the common cash flow mistakes out there, chances are that you have dealt with at least some of these issues. Facing adversity is not uncommon to small business owners, but we want you to know that you are not alone.

SBS is here for you every step of the way, making sure you plan for, and acquire, the cash flow you need to not only survive COVID-19, but also thrive in the future. Contact us today to discuss your current situation and opportunities, and you’ll be one step closer to weathering the storm and breaking through these barriers to achieve success.

Overcoming COVID-19: What You can do to Help Others and Yourself

First, and foremost, we hope you are safe and healthy, and our hearts go out to all small businesses affected by this unprecedented pandemic. While COVID-19 has turned many of our lives upside down, there are still positives to take out of this experience, and things we can do to help others and build up our communities.

Your goodness and kindness goes a long way, as we will get through this by coming together as a united front. As you continue to work your way through this unforeseen reality, here are some things you can do to help others, yourself and your business.

Take groceries to those who shouldn’t, or can’t, go out. Whether it’s an older family member or friend, an elderly neighbor, or perhaps someone who faces health problems or disabilities, you should help them get their basic necessities, if you can. Volunteer to get them the groceries they need to survive.

Call or write others. In our everyday, busy lives, we sometimes neglect calling or writing those who mean the most to us. COVID-19 has certainly put life into perspective, making human interaction something all of us need to get through this time. You’d be surprised how much a simple phone call or note would mean to those who are housebound. Just hearing your voice or seeing your kind words can uplift or inspire those around you, while improving your relationships and bringing the community closer together.

Spend time with family. One of the positives of the shelter-in-place and stay-at-home orders is that many of us get to spend more time with the family we live with. Take advantage of this time together. When we all love each other and spend quality time together, we have memories and moments to cherish and behold – something that’s important during this difficult time. Spending time on your marriage, and with your kids and other loved ones, has never felt so important, at least for me.

Take your business remote. Shifting gears, many small businesses have been affected by the virus, forcing us to work from home and manage our teams remotely. It’s one thing to embrace and enable a remote workforce, but it’s another to have to do it completely 100 percent. With this new reality, we must all adjust as business owners to ensure our businesses survive this crisis. Check out our recent blog to get tips for managing a remote workforce.

Donate. Another thing we can do right now is donate to causes we believe in or that need our support. When you hear “donate,” your first thought may be money, but time also applies. You could give blood or give a donation, drop off food to a local food bank, donate to kids in need, or even embrace other local businesses such as getting takeout from your favorite restaurants. These are just some suggestions. Find something you connect with and want to do. A little bit of your time or money could go a long way to helping those in need.

Banding Together Toward a Greater Cause

It’s common to devote most of our time to our work and immediate family, and perhaps live a more private or secluded life. But, with this pandemic, we all must come together to collectively combat the coronavirus, and help each other survive and grow.

I hope some of these suggestions help inspire you to take some action, if you can. I also believe that when we face adversity – and overcome that adversity – we are stronger and more successful. It’s that backbone and resolve that will get us through these difficult times. And, remember, a little bit of help can go a long way!