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When you operate a small business, it's necessary to follow a strict budget to help you meet monthly financial obligations while still reinvesting in your company. This type of cash management may seem simple, but even small changes can disrupt your strategy. Below, explore a few common issues that can interrupt cash flow, so you can prepare your business for the future.

What Factors Affect Your Business’s Cash Management?

1. Over-Investing in Your Business

Business owners rely on financial projections to determine how much they can afford to reinvest in the business. If those estimates are overly ambitious, the company may not meet those expectations. This poses a problem when you rely on those earnings to buy new equipment for your business. It’s better to put off major investments until those earnings have been documented, because it may not be possible to liquidate physical assets, like machines, later.

2. Non-Paying Customers

Cash ManagementDepending on the type of business you operate, you may provide payment programs that allow your customers to make payments over time. While this can help to make a sale, it may also cause cash management problems. It’s common for customers to fail to meet their payment obligations once they have received the service or product. Be sure your customers have a good repayment history and establish strict policies for collecting debts to avoid future hiccups.

3. Failing to Document Every Expense 

It’s all too common to forget to document small expenditures as they occur, such as buying stamps. While these expenses may seem insignificant, enough of these minor expenditures will add up over time. By the end of the month or quarter, you may have spent hundreds, or even thousands, of dollars that are not accounted for in your budget. This can leave your accountant with the challenge of reconciling the budget with actual spending.

4. Sales Fluctuations

Over time, you’ll notice trends in your sales, and you might rely on these trends as a basis for estimating monthly income for the business. However, the changing of seasons and holidays can affect your sales. If you don’t take the time to evaluate how yearly events affect your business, you may be surprised by fluctuations in cash flow that aren’t as random as they seem.

 

For help regulating your business’s cash flow, contact Erie & Associates, P.C. in Texarkana, TX. They provide companies and individuals with accounting, cash management, and tax preparation services. Their dedicated accountants will work with you to help your business achieve its financial goals. To schedule a consultation, you can visit their website or call (903) 792-6651.

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