4 cashflow errors to avoid at all costs

As they say, knowledge is power… With that in mind, here are the main cash flow mistakes we hear about from our community of business owners and advisors, which you can now avoid at all costs!

1. Unrealistic expectations. Having a cashflow forecast is going to give you the confidence to make predictions with insight – and act accordingly. Protect yourself and your company by putting your figures into a forecast, and you can start planning your future. Remember that other than you, your team know your business best. Use their creativity and points of view to diversify and expand ideas.

2. Overestimating your future sales. There’s no way of predicting your incoming cash to the penny, so rely on scenario planning to get an idea. If anything, you should underestimate your sales volumes so you can prepare yourself for the worst. Create a base assumption and build variations on top to really get the most of scenario planning.

3. Ignoring your budget and forecast. Keeping your eyes firmly on both of these tools will bridge the gap between reality and your dreams, so if your business begins to show signs of going off course in either dichotomy, you’re going to be able to prevent damage instead of trying to repair it. Both your forecast and budget should reflect your plans for the future but are based on past experience.

4. Not leaving yourself a buffer. Sometimes you’re going to need to dip into your cash reserves. But remember, rule one of business is never to completely run out of cash. Liquid assets are easily converted into cash, with little to no impact on its value. Using your assets to reinvest in your business and help it grow sustainable. You could hire more staff, acquire new stock, and make improvements to premises.