Cash flow problems are the most common reason for business bankruptcies – even for profitable companies. By identifying typical mistakes, you can avoid them and keep your business on a solid foundation.
1. Delayed Invoicing
Every day of delay in invoicing pushes cash flow further out. Automate your invoicing and ensure that invoices are sent as soon as work is completed.
2. Poor Accounts Receivable Tracking
Actively monitor who has paid and who has not. Send payment reminders even before the due date and react quickly to delays.
3. Excessive Inventory
Inventory ties up capital that could be used elsewhere. Optimize stock levels based on demand and consider just-in-time delivery models.
4. Insufficient Forecasting
Without a cash flow forecast, you cannot see problems coming. Prepare a forecast at least 3 months ahead and update it regularly.
5. Funding Growth from Profits
Rapid growth requires working capital. Do not try to fund everything from profits – leverage external financing to support growth.
80% of fast-growing companies use external financing to support their growth.
6. Poor Contract Terms
Negotiate payment terms carefully with both customers and suppliers. Aim to get longer payment terms from suppliers than those you give to customers.
7. Lack of Reserves
Always maintain a working capital reserve for unexpected situations. Two to three months of operating expenses is a good target.
