Knowing how to manage cash flow is just as important as having a profitable business . Some mistakes are quite common when structuring cash flow, and some entrepreneurs end up making the wrong choices , either due to inexperience or lack of knowledge in the financial area, compromising a good assessment and, therefore, its correct management.
I’ve come up with 11 cash flow mistakes that your company can’t afford to make. Want to know what they are? Check out today’s post!
1. Not controlling cash flow
Having all the knowledge in your business area is not enough if you do not combine it with finance.
The growth of a business is made possible from there, starting with cash flow, which is nothing more than financial inflows and outflows. Keeping track of this allows you to know how much is left, where it comes from and where your money goes.
When it is not done, the lack of perspective makes it impossible to avoid problems before they happen because, in addition to being part of the routine, cash flow control shows a lot about the future.
In other words, it is the basics for making a profit. As well as helping you act in advance according to what you can analyze, it also encourages you to plan and invest better, generating benefits in the short, medium and long term.
2. Not updating cash flow regularly
The rush of everyday life means that many entrepreneurs only update their cash flow once a week or once a month. However, payments and receipts are made daily and if you don’t have accurate information, you won’t be able to make any reliable decisions.
3. Not categorizing cash entries
It is essential to separately record the expected inputs and outputs, those that have already been effectively carried out, and also to know where they came from, where they went and when they went.
Furthermore, distinguishing between items such as taxes, pro-labore and employees allows control over every cent paid and received.
When you know which areas are spending the most money , you can develop strategies to reduce unnecessary expenses. Just like income, by categorizing revenue , you can identify where the highest returns are and direct new investments to those areas.
4. Use generic categories
You already understood the importance of using categories in the previous topic, so don’t be generic when creating new categories.
It’s normal to have moments of limited creativity or laziness, but finding inputs and outputs categorized as “Other inputs”, “Miscellaneous inputs”, “Other outputs” and “Miscellaneous outputs” is the same as nothing. Value your organization! It will save you in the future when reporting and budgeting.
5. Control via cash book
Many years ago, the best way to control the flow was through notebooks, called cash books.
However, when recording income and expenses with just paper and pen, cash flow ends up being just a record of the past and does not fulfill its main purpose, which is to help understand the past and also predict the future to make better decisions now, in the present.
Without the necessary information, it is impossible to clearly understand your financial health, where to invest or cut costs. Therefore, having your finances organized in software, makes a huge difference in your day-to-day life and in improving your business as a whole.
With it, you can use data intelligently, generating graphs and detailed reports of income and expenses, separated by time period, sectors or according to your needs.
6. Counting on money that hasn’t come in yet
This is another very common situation that occurs in companies: having money that has not yet arrived in the cash register.
For example, a sale divided into 5 installments, with the first installment to be paid by the customer after 30 days. This means that one installment will only be received in 30 days, and many entrepreneurs end up spending before the money even arrives, without realizing that they run a great risk of the customer delaying payment, a more urgent expense arising, the banks going on strike or some other unforeseen event occurring.
The ideal is to wait for the receipts to be actually made before making any type of investment or expense, to avoid a negative cash flow. The tip here is: launch your sales according to the customer’s payment method.
7. Personal accounts and company accounts
This is perhaps one of the most common mistakes , made mainly by beginning entrepreneurs: confusing personal accounts with company accounts.
It is important to understand that the company’s cash is not your bank account and that it is not there to make withdrawals whenever you need. Try to establish a fixed amount for your salary and include it in your monthly cash flow planning . This will prevent constant withdrawals from causing greater losses .
8. There is inconsistency in the information provided
There is no point in entering a large volume of information into the cash flow every day if this data does not present the ideal level of detail.
For example, indicating that today there was “+ R$50 for the bank” could mean an entry of R$50 in bank sales, but at the end of the month, you or your colleague could understand something like “pay R$50 to the bank”.
With that, it is certain that you will spend a good deal of time trying to remember the meaning of the observation, apart from the possibility of interpreting it incorrectly without even realizing it.
Therefore, keep the information clear and complete in all records that are made.
9. Control via spreadsheet
Even though it may seem easy, the processes in a spreadsheet are all manual. You can lose notes, data can be changed or deleted by accident and everything can become a mess. Over time, it requires more effort, affects your productivity and does not guarantee the same control, especially in the event of loss, accident or even data theft.
With software, you can automate many processes, reducing the chance of errors and, especially, wrong decisions. It is reliable, practical and gives you time to achieve your goals as planned.
10. Overestimating the forecast
Estimating high profits based on assumptions or false information ends up betraying the organization in its purpose of growth, contributing to failure.
Making mistakes when entering information, leaving gaps in daily details and even fluctuations in revenue caused by seasonal sales can cause any company to declare bankruptcy in the first few years.
11. Making impulse purchases or investments
Purchases made without planning affect both the company and personal life.
No matter what the expense was, whether it was investing in sponsorship without first analyzing the conditions, replacing equipment without analyzing the cash flow or purchasing large orders in an unfavorable month, it will only bring losses to the company’s cash flow.
If the stock does not move and there is no return in the short or medium term, it is easy to identify that it is an impulsive expense, and it may result in a lack of money for other needs.
The ideal is to wait for the right opportunity to buy in large quantities, research more affordable prices and only invest when you are certain that you will be able to cover the costs .