Profit and Cash Flow Killers: Business Growth Mistakes You Need to Avoid
You’re bound and determined to take your business’s growth up a few notches in 2021. In fact, you’ve already floated some ideas for boosting your bottom line.
The question is, how do you know that the trajectory you’re taking will actually take you to the next level?
Unfortunately, common business mistakes can kill your profit. These mistakes may involve poor cash flow management or the failure to engage in cash flow forecasting, for example.
Fortunately, we’ve created a guide to help you to avoid these and other small business growth mistakes.
Let’s jump in!
Cash Flow Management
One of the most common profit-destroying mistakes that businesses make is not managing their cash flow effectively.
Cash flow refers to the money that flows both into your business and out of the business each month. Having a steady flow of cash is important because without it, you will run out of money.
In turn, your business will fail.
To prevent this, you need to implement a cash flow management system. Examples of this type of system include PlanGuru, QuickBooks, and CashAnalytics.
Without these types of systems, you won’t understand which steps to take to alter your bank’s cash balance as needed.
If you start managing the money flowing into and out of your business more effectively, then you could easily generate more profit without necessarily having to generate more business.
Cash Flow Forecasting
Another common mistake is not having a cash flow forecast or budget in place. Unfortunately, these essential aspects of business management are often overlooked.
A business budget is particularly important because it tells you exactly where your money is going. However, a well-designed budget will also paint a picture of what you could financially achieve in the following year. Then, it should highlight the actions needed to get your business to that level.
A cash flow forecast is also essential because it tells you what your company’s financial position may look like in the future. This information is based on your expected receivables and payments.
Note that you should consistently review your cash flow forecast to keep track of your business’s financial progress.
Also, be sure to review your business’s profit and loss report, as well as its balance sheet, every month. These documents will help you to examine financial trends as well as opportunities for improvement.
All of these documents can give you the financial clarity you need to run and grow your business long term.
Many business owners also make the mistake of not creating systematic processes for managing their inventory.
Fortunately, software like Orderhive and Zoho Inventory can help you to effectively manage your inventory.
Inventory management software is important, as it helps you to track what products are selling. In this way, you can avoid investing heavily in offerings that will not sell.
By lacking an inventory management process, you increase your chances of losing hundreds of thousands of dollars. This is money that could easily be used to expand and scale your company.
Start Experiencing Higher Levels of Small Business Growth Today
Figuring out how to expand your small business can no doubt be overwhelming. This is true no matter what size your business is, and no matter what sector you operate in.
However, now couldn’t be a better time to take a step back to assess your business’s strengths and weaknesses, especially in the areas of cash flow management and cash flow forecasting. By doing so, you can put yourself in a great position to create a winning business growth plan this year.
Keep in mind the above mentioned common business mistakes as you work on charting a prosperous future for your company in 2021 and beyond.