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Are You Making These Cash Flow Mistakes?

If you have been following us here at Apex Virtual Accounting, you’ll know how much importance we place on understanding the cash flow of your business. One of the most significant challenges that businesses face is learning to manage cash flow. As a business owner, it’s critical to understand how much money is needed to keep day-to-day operations running as well as the revenue that needs to be generated to support operations.

Fifty percent of small business start ups never make it to their fifth birthday. Mismanagement of cash flow is one of the culprits behind this statistic but it doesn’t have to be your story. Keep reading to learn about four common cash flow mistakes and what you can do to get back on track.

1 - Spending Money That You Don’t Have

What are your motivations behind each business purchase? Maybe it’s a purchase that will benefit your business through increased sales. Or perhaps your only motivation behind the purchase was the fact that it’ll be a tax write-off without having any other purpose or benefit to your business. Spending money on your business is not only necessary to keep operations moving but it can serve as an investment in the growth of the business. If the motivations behind your business spending don’t seem to have a clear benefit ask yourself: “What benefit does this purchase have to my business?”

2 - Not Planning For Unexpected Expenses (No Savings)

In our personal lives, we’ve all experienced those “surprise” expenses whether it be car issues, a broken refrigerator, or an unplanned medical bill. Businesses aren’t immune to their own set of unexpected expenses. Maybe it’s a business vehicle that needs to see a mechanic or a vendor bill that comes in higher than expected. In any of these situations, having a cash cushion can help to alleviate that feeling of panic when these types of expenses come through your office. Having some kind of savings and cushion within your business also helps lessen stress during the slower cycles of your business when you aren’t bringing in as much revenue.

3 - Not Making Estimated Tax Payments

Taxes are typically the largest expense small businesses deal with. If you fail to set aside money for taxes or neglect making estimated tax payments throughout the year, you could find yourself with a surprise tax bill come tax time. To avoid this tax time panic, track your estimated tax liability and set aside enough cash to cover this liability so that you’re able to pay once taxes are due.

If the world of taxes as a self-employed person is overwhelming and confusing, check out our course - How Much Can You Pay Yourself From Your Business and Plan for Taxes? This course will walk you through how to estimate taxes due on your self employment income, how to pay those taxes, and ultimately how to pay yourself.

4 - Managing Cash from Your Bank Balance

We’ve come across many small business owners that manage their business from their bank balance. The trouble with this is that it gives you a very narrow view of what is happening in your business. This “method” of managing cash doesn’t give you a clear picture of the upcoming expenses, outstanding checks, and projected revenue. It can also be difficult to analyze trends and identify areas where cash flow could be improved.

Taking the time to put together a simple cash flow statement in Excel can help you to have a broader view of the ins and outs of cash in your business. Projecting expected revenue and expenses can also give you a better idea of your bottom line when making strategic business decisions. When you grow out of Excel there are different applications and softwares that can assist in your business’ cash flow management.


Running your own business is no small feat - not only is there cash to manage but there are the daily operations to run, orders to fill, services to provide, people to manage, and so much more. We offer virtual CFO services that include assistance in managing cash flow, helping to implement systems to monitor cash flow, and more. If you are ready to take that next step in your business, reach out! We’d love to hear from you.

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