Boss Lady

Common cash flow mistakes made by new small businesses


Going into business for herself is one of the most empowering things a woman can do. What better way to counter the inherent inequalities that are still rampant in today’s workplace from widespread casual misogyny to the gender pay gap which the World Economic Forum estimates will take 200 years to close completely? Entrepreneurship gives women an opportunity to rewrite the rules on their own terms. But, as many women learn, the path of the entrepreneur is beset with as many caveats as there are opportunities. One of the finest lines business owners across the gender spectrum will walk is the one that pertains to cash flow.

Cash is queen, but business owners need to master a perilous balancing act between ensuring liquidity and investing appropriately in their businesses. As such, new business owners should be wary of these common cash flow mistakes made by nascent small businesses…

Overestimating future sales volumes

When you’re starting out in business, you’ve invested a lot in developing your products and you’re (quite understandably) proud of them. But just because you, your team and your investors see how your products will benefit your target audience, it may take a while for consumers to catch up. As such, you can risk over investing in inventory that freezes your assets and sits on the shelf for long periods.

While you can always free up liquidity (and draw attention to your brand) by throwing a flash sale, you can expect your margins to take a hit.

Failing to accurately account for taxes

Cash flow requires careful and comprehensive budgeting. And this means accounting for everything. One of the places in which many nascent businesses falter is failing to accurately account for local taxes. Using tools like this GST Calculator or your local equivalent can help to ensure that you’re never caught out by a tax bill.

“Vanity spending” on brand building

If you’re spending more on getting your name out there than investing in an infrastructure that delivers operational excellence, you could be setting yourself up for a fall.

Don’t get us wrong. Building your brand is important, especially in your “sink or swim” early days. But remember that brand building is more than just an exercise which one throws money at. It’s all-too easy to lose track of spending on paid ad campaigns just as it’s easy to indulge in wasteful spending on paid ad strategies that aren’t followed up by organic lead capture strategies or keywords which are too high-competition to be effective.

Even if your campaigns do resonate with an audience, unless you’re investing in delivering quality to customers you could find yourself making promises in your marketing that your operations can’t keep.

Relying on cash flow loans

Finally, while cash flow loans can seem like a temptingly convenient option when you hit a bump, it’s essential that you take a good long look before jumping into these waters. These loans are typically high interest and could significantly bottleneck your cash flow in the coming months or even years.

About Business Woman Media

Our women don’t want to settle for anything but the best. They understand that success is a journey involving personal growth, savvy optimism and the tenacity to be the best. We believe in pragmatism, having fun, hard-work and sharing inspiration. LinkedIn

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