Cash Flow Warning Signs

Cash flow is probably the most important thing to keep on top of and understand in business. Whether a small sole trader or a large business, knowing where your money is coming from and going to is extremely important. There are a number of guides and helpful articles available outlining how to calculate and keep on top of your cash flow, as well as qualified bookkeepers who can control it for you.

But even with the help of a professional bookkeeper, business owners must be able to identify potential problems that can affect cash flow before it is too late.

Overstocking Goods
It might seem like a good idea, but over ordering stock can have catastrophic consequences for your business. Having stock that you cannot shift or sell on is a serious waste of funds and points towards poor cash flow management. Only order what you can sell: you can always order more as demand increases.

Poor Ordering and Invoicing Practices
Do you keep meticulously detailed invoices and accounts, outlining who has bought what, when they bought it, how much they owe and whether or not they have paid yet? If the answer is no then this must be fixed quickly. Understanding and getting on top of customer order details and payments is very important. If you have a chaotic ordering system then the chances are you will lose track of who owes you what and in the end you will lose money unnecessarily. Do not be afraid to chase debts, just make sure you know what it is you are chasing.

Invoicing duties can be outsourced to a professional bookkeeper so there is no excuse for poor management in this area.

This is just the tip of the iceberg. Business cash flow management is tricky but is a must. Get help from a qualified bookkeeper, be firm and get the right procedures in place!

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