The Common Mistakes in the Cash Flow Management

Whether you’re a small business or a large one, managing cash flow is a critical aspect of running a successful Aussie organisation. All too often do Australian companies go under on their path to being ‘cash flow positive’, making overdue payment a common occurrence in their workplace. Legitimate cash flow issues arise when businesses, especially startups, do not regularly monitor or understand their cash flow. No business is perfect, but making mistakes with your cash flow is something you’ve got to avoid if you want to be successful in the competitive Australian market. To avoid a visit from the debt collectors, here’s some common mistakes to avoid when managing your cash flow.

Not Keeping an Eye on the Accounting Side of Things

It should go without saying, but to help ensure there are no overdue payments or collection letters coming your way, monitoring your money as closely as possible is great business practice. Simply using an accounting management system is insufficient in positive cash flow efforts, so keeping a close eye on the delicate balance of sales and expenses is critical to success.

Forcing Growth Too Soon

Most Aussie businesses will have the same goal in mind - be as profitable as possible in the shortest amount of time possible. But this mentality can lead to bad debt if not handled properly, and a collection letter may be in your mailbox if you shoot for the stars all too quickly. For example, most startups in Australia love to invest in the social media ad space. When they see reasonable returns on their initial investment, they then double, triple or even quadruple down on this investment and expect to see the same ratio of results. Although it isn’t time consuming to invest in this sort of advertisement, the debt collectors may soon knock on your business door when you don’t receive the exact same ratio of engagement from this business expense. It’s critical for Australian businesses to identify what expenses are worth their salt, and what expenses will put them into outstanding debt. Slowly building your business with an effective payment plan is crucial to avoid those nasty collection letters.

Misjudging Required Sales Margins

When you’re starting a business, or even as an established company, there are always a lot of variables that can put you between profitability and a visit from a debt recovery agency. Your cash flow can change from week to week, so working out how much of your product you need to sell to be profitable can be tricky at times. Constantly adapting this profitability target by the week as different expenses or market fluctuations arise is crucial to avoid collection letters. A lot of small businesses have quickly gone under the wing of debt collection agencies because of their inability to adapt their spending according to changes in their business. Revising, adapting and strengthening your profitability margins is a great way to manage your cash flow.

Missing Overdue Payments and Collection Letters

When things start to get a little hairy for new businesses, some owners will often keep their ‘head in the sand’ and avoid collection letters from their debt collection agency. This method, although it should go without saying, is ill-advised if you wish to have a positive cash flow. If there’s one place Aussie businesses shouldn’t be avoiding, its the debt collection agency. Overdue payments and collection letters can be managed by taking a proactive stance against bad debt, and implementing effective debt collection techniques is a must-do to avoid time consuming collection practices.

Onboarding the Wrong People

You should only ever want the best players to be on your favourite team, so why wouldn’t it be the same in the workplace? To avoid bad debt, spend your crucial dollars on hiring nothing but the best. A rigorous interview process is always a great first step, and although time consuming, it’s a great way to really get a feel for the person who will be such a huge part of your businesses cash flow, especially start ups.

Undercharging the Consumer

It’s important to know your products worth as a business to get the most out of your cash flow. Whether you’re selling a good or a service, properly pricing whatever your business puts into the economy can be the difference between a positive cash flow and an overdue payment. Implementing a more intense sales tactic is a great way to justify raised prices, and although it could make the transaction more time consuming, it’s a great step to a positive cash flow and getting the most out of every customer. If you were to raise product prices, implementing payment plan options like bi-weekly installments is a great method, too. By avoiding these common mistakes made by a lot of Australian startups, you’ll be on your way to a positive cash flow and won’t be receiving any overdue payments or collection letters in the near future.