What can be a more worst nightmare than one day seeing your business closing down. That too for what? Mismanagement of Cashflow? As if competitive challenges weren’t enough, obstacle hurdling the show weren’t less, revenue generation wasn’t going well enough, another major fall down leading to the bankruptcy of a business can be horrifying. Even companies that started with fresh venture ideas and plenty of loyal customers can fold if owners and marketers do not pay proper attention. In this blog, we will learn about the worst cashflow mistakes that can kill your business right away.
Small business owners are already overloaded with huge responsibilities and tons of business activities, therefore, having very little time for cashflow management. This mismanagement in business development can lead to business failures nad ultimate shutdowns.
Even though your organization has the perfect group of employees, leadership and management, high customer and employee retention rates, your company is like the ferris wheel circling till it has the everything in order. The moment it loses a nut or bolt, it starts falling down. To add this injury, there are certain hidden unrecognizable defaults that start showing up all during such crises.
In this blog, we will run through some common mistakes that companies or professionals make and oversee the consequences.
Forceful Company Growth Movements
What do you understand by forced growth of a company? You must have seen companies spending on their strategic business plans on marketing their products. For example, investing upon personalized ads in Facebook, Google, PPC Campaigns, billboards, etc. are some effective marketing strategies indeed. But only when the business is already paying high-off returns.
Situations where startups are trying to bring sales investing huge amounts inorganically despite their unpopularity and low brand awareness, the plan in turn backfires the business. That is what we mean by forced business growth. Everything has a time. Even the smartest marketing techniques, be it online or offline, don’t bring immediate results.
Therefore, analyzing the business plan and not screwing the cashflow management unnecessarily will prevent your business from future crises. Rather, you can use the capital in regular operational costs and management development.
Copying the Best High-Level Players
Often entrepreneurs and freshers possess a burning instinct of competitiveness and egoism. Well, it’s good to be competitive in nature, but not egoistic or over-confident. You are not a copycat who follows the same working patterns as your competitors. Yes you can take assistance and evaluate your business-level strategies to improvise them when they are not being not productive. But it is an injustic to your innovative mind that produced the fresh venture ideas.
Always, remember that big players in this game have achieved this position with their hardwork and dedication. They too started from scratch once upon a time and with continuous efforts made it to a position where they stand today.
Copying their strategies and investments would only bring you losses and degrade your abilities and strengths.
Incorrect Calculation of ROIs
At times, if you are a fresher or a newly designated entrepreneur, you might face the lack of profits from selling your services and products. Why do you think it happens? Let’s understand this situation with a better example.
Supposedly your friend runs a cold storage in his locality. He buys the stuff at 50% margin from its original sources. Now, he buys bacon strips at ₹300 and sells them at ₹600, where he believes he is making a profit of ₹300 considering minor expenses. But when he prepared the report or you can say, the balance sheet at the end of the year, he realized he made some losses. It all happened since he did not consider transaction fees, shipping charges, storage charges, marketplace commission, and cost of returns.
At times, many business owners get tempted away in purchasing new office locations and invest too much in fancy utilities. All these are welcomed when a company has made enough profits after paying off every debt and company requirements. But small-scale businesses or new startups making such unnecessary investments would convert them from a cash-rich company to cash-hungry company.
Not Having a Secondary Reserve System
You cannot expect your business to go smooth as butter the whole time. The entrepreneurial journey is full of surprising events, sometimes even abnormal. Emergency crises or situations keep arising every now and then. Therefore, it is necessary to keep an emergency reserve account for unwanted and unexpected emergency.
No matter what industry your innovative fresh venture ideas relate to, it is necessary to save money and put aside those instant liquidity to deal with unforeseen problems. So now when the ceiling fan falls down, or the roof light starts fluctuating, you will have the right means to deal with it instead of shutting down the whole place.
Pressured down with Monthly Charges
Whether small-scale business or large-scale business, monthly bills and subscription charges seem to get caught up in business’ monthly charges. The source can be anything from tools and amenities to power sources. These monthly subscriptions cost higher and offer merely 30 days of usage, therefore, it’s better to indulge in one year subscriptions and forget about those irritating recurring bills.
Money or cash is the lifeblood of an organization. It not just saves you from emergency situations and crises only, but also encourages in improving organizational performances of the firm. Healthy cashflow ensures consistency and adequate necessary expenses. For that, you now don’t have to sweat around to learn accountancy. It is all about how better you analyze your run in the market and seeking to improvise thinking about the future.
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