Here are the 5 most common cash flow management mistakes:

1. You don’t check your cash flow often enough

With as much innovation and determination as small and medium sized businesses show every day of the year including weekends, nights, and holidays, they are ultimately victims of the clock - there never seems to be enough time to do all the zillions of tasks that need to be done to both maintain current workload and expand for the future.

The problem with the time-starved is that there needs to be time to pause, assess your strengths and the market, then strategize. With small and medium businesses, the stress is on quality production which is often tailored to the client.

Counter-intuitively, making the time to adopt a cash flow management system actually saves you time while also buying some valuable perspective to make strategic moves.

Gone is the crunch of decision making in a panic or with lack of knowledge.Once in place, commit to looking at your cash flow scenario weekly - regular assessments mean you'll be positioned to proactively manage problems as they appear on the horizon.

2. You don’t stay on top of your receivables

Without a clear understanding of who owes you what and which invoices are unpaid, your business may run the risk of not getting paid when you expect or as fast as you expect which can leave you short.

Meaning that not tuning in to your receivables could leave you in a cash crunch, and without the freedom to take advantage of best opportunities as they become available.

Keeping your due dates on track and following up when they change means you’re able to strategize project start and end dates, manage capacity, buy materials and pay bills - all without worry that you’ll run out of operating cash.

3. Your team doesn’t have a clear view of your cash flow

We know that there’s usually one central person who manages cash flow - maybe you, or maybe even your accountant - but it’s key to carve out enough time to make sure your core team is looking at the same data.

Either in-office or remotely, using cash flow software ensures that everyone sees the same thing, which is key when you think about what could happen if everyone has a different idea of your cash flow and how to prioritize its use.

‍Picture what might happen if:

‍• An invoice that should have gone out was delayed but this wasn’t communicated

• A milestone was thought to be completed - where is payment?

• Key feedback from your customer doesn’t come back to the decision-making level

• An immovable delay occurs and a workaround has to be created

• Invoices don’t meet vendor or client criteria and thus get backlogged

• No one is sure which actual day is deliverable handover (and final payment)

Reviewing cash flow as a team on a weekly or monthly basis is an insurance measure to make sure that nothing falls between the cracks of your business operations.

Looking at scenarios in the present and the future means that you’ll retain your title as the most proactive (and therefore calmest!) leader ever.

4. You don’t know who you owe - or when

Failing to track and promptly pay your business’ accounts payable is one of the key ways to overestimate your cash flow. Funds that are earmarked as being owed should be paid promptly on the due date for the health and realism of YOUR cash flow - not just for others.

Make sure you’re clear on the terms of payment that are required of you and pay in a timely fashion. While it might seem like keeping payments back is interest that stays in your pocket, the reality is that for the inaccurate cashflow picture that a fat wad of cash for accounts payable (AP) represents, a business can make strategic errors based on the belief that there is more cash available than there actually is.

The best way to avoid this is to keep track of money that you owe or will owe, and work on a schedule of milestones or partial payments that have been made toward a balance.

5. You manage cash flow from your bank balance

Perhaps you log on to your banking website on a regular basis to ensure that all is well with your business accounts - totally understandable and can be comforting.

However, a glance at your bank balance every week or even every day is a difficult way to manage cash flow for a number of reasons.With the flow of banking in the digital age, it's a rare person that hasn’t been caught off guard while trying to make operational decisions based on the incomplete information that bank balance and transactions provide.

Raise your hand if you’ve ever cut a cheque and sent it to contractors, knowing they cashed it, but the bank posts it as cleared after the money has left your account, giving you a false sense of your cash flow.

Raise your other hand if your automatic rent withdrawal, representing a sizeable portion of your AP load and supposed to be withdrawn on a set date, has ever been posted early or late - causing extra thought, a phone call, or a delay in operational decisions on your end, or even a misjudgment about other transactions that might hinge on that one.

The really nice thing about Dryrun is that we designed it to allow users to separate accounts payable and accounts receivable data into separate streams so that you can isolate your cash flow without the ebb and flow caused by bill payment and invoicing.

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