Don’t Have A Cash Flow Catastrophe!

Don't Have A Cash Flow Catastrophe

Although all businesses need to turn a profit, there are relatively few entrepreneurs out there who consider finances one of their strong points. While your head may be bursting with great ideas for your venture, all the numbers you need to keep track of can quickly become overwhelming. However, until you can comfortably hire people to do it for you, having some kind of handle on your finances is essential. Here are a few big cash flow mistakes all start-up owners need to avoid…

Don't Have A Cash Flow CatastropheImage Credit Public Domain Pictures


Most successful business owners know full well that procrastination is something that needs to be avoided at all costs. However, if you’ve spent years building up your work ethic for tasks dealing with a specific facet of your business, it can still be very difficult to knuckle down and deal with your pressing financial work. Unlike more creative aspects of running a business, putting off your accounts isn’t something that you can do forever. If you ignore the issue, it will only become bigger and bigger, and could possibly come back to bite you at a later date. Break everything you need to do into manageable, measurable tasks, put them on your calendar, and then get them done!

Underpaying Taxes

If you think that the only companies that don’t contribute the taxes they owe are multi-national giants with many offshore bank accounts, then you’re gravely mistaken. Due to small businesses often dealing in cash, and handling many transactions that aren’t reported to the IRS, a lot of them can wind up understating their revenues, overstating expenses, and ultimately underpaying their taxes. Most experienced tax attorneys will have had more than a few clients who were small business owners, and simply didn’t have the knowledge necessary to make sure they were paying all they were due. Don’t let yourself become one of these! Some underpayments from small businesses are totally inadvertent, and rooted in a genuine, practical difficulty of complying with the tax code. Some of it is intentional, with business owners figuring they’ll shrewdly get around the system. This means that high compliance costs often hurt responsible business owners more than irresponsible ones. Make sure you’re complying with the tax code, and not cooking up unnecessary problems for yourself.

Failing to Understand Seasonal Cash Flow

It’s absolutely essential for small business owners to understand seasonal cash flow. A lot of business models will have erratic spikes that may happen during the tax season, and turn into troughs through the summer. Countless entrepreneurs have had to learn the hard way that it’s necessary to maintain a pretty sizable cash cushion in order to see you through those months where things begin to slow down. You need to know your cash flow like the back of your hand. If you’re running a business-to-retailer company selling relatively cheap items, your sales cycle is probably going to be turning over quickly, meaning that having your cash cushion on hand is going to be fairly easy. However, for a lot of other B2B operations, having that safety net in the bank is pretty much an essential!