Every other business owner will have a lot of work associated with his business. He has to take care of each and everything of his business. So, he hardly gets time to see the cash flows and have a check on them.
But this is the biggest mistake any businessman can do. It is very important to manage the company’s funds amidst the other works. It is important to carve out time and dedicate it to managing the finance of the company.
In spite of having a great business idea, fully equipped process, 80% of the businesses, irrespective of being big or small will fail as they cannot manage their cash flows.
Especially the hidden cost and the other expenses will have a great impact on the cash flows. It is very hard to manage them as they cannot be easily perceived.
In this article, we will be discussing the deadly cash flow mistakes that can kill the business. This article especially suits the new and small businesses. Have a nice read on the article, so as to avoid these mistakes and flourish your business.
Never force the growth
Never forget that gradual growth is stable growth. If you find an idea that helps in growing the business positively, do not rush with it in one take. Induce your money in that idea a little by making sure that it will never fail.
Even though the situations firmly make you believe, that a particular way can gain you a lot of money, never rush over it.
Your extended investment can generate a lot of revenue but it will not be proportionate to the investment that you have made. Always check that the investment is proportionate to the revenue.
Do not spend too much on sales
During the start of a business, it is very important to gain prospective customers. Incurring a little loss because of this activity is also not a big deal. But you have to be conscious of the “acquisition cost” and the “lifetime value of the customer”.
Acquisition cost is the cost which you spend on gaining a new customer. The lifetime value of the customer is the total value generated by a single customer over his life span. See to that the acquisition cost is less than the lifetime value.
Do not be carried away by the false statement, “more the customers more the return”. Know about the hidden elements of the acquisition cost. You have to add all the indirect costs to correctly calculate the acquisition cost. If you have no idea about the acquisition cost you will burn up your entire money.
Do not ignore the seasonal nature of the business
This happens with that business, which does not have a year-long operation. Initially, the business will feel cash-rich and the same condition prevails even during the peak seasons. This will directly bring difficulty in managing the daily cash outflows.
When there are overhead commitments it is difficult to maintain the business during the off-seasons. As these seasons result in discounts and offers the profit margin will reduce for maintaining the level of sales.
So it is very important to have an offseason financial plan. For instance, Diwali seasons, Christmas seasons, summer seasons, and marriage seasons. You will have a lot of sales during the summer season if suppose you own hand fans wholesale business.
During the rest of the year, the sales will literally come down and leading way to heavy cash outflows. The betting odds are a bookmaker’s assessment of a possible outcome of a sporting event.
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Apart from this, you should also avoid late payments, wrong hiring, inadequate credit score, improper management of taxes, and other hidden costs. When running a business, you yourself know what is to be done and what is pending. Call out time, to do the needful. It would be very bad when you do not know about the hidden cost. So plan well and manage your cash well.