The 5 Biggest Cash Flow Mistakes Businesses Make (And How to Fix Them)
Making money isn’t the same as keeping it.
As outsourced CFOs, we often see small businesses focus on revenue. Many business owners we talk to feel like if they just had more sales, they could solve all of their issues. And while revenue is important to any business, it is consistent, positive cash flow that will keep the doors open.
Cash flow is the lifeblood of your business—it’s not just about how much money you make, but how much you keep. Many business owners don’t realize they’re slowly bleeding cash until it’s too late.
Because it is our mission to help eradicate business failure, we want to break down some of the biggest mistakes that we see and ways to fix them.
The 5 Biggest Cash Flow Mistakes:
Cash flow issues don’t happen overnight. They often build up over time through things like operating inefficiencies, poor financial habits, and lack of insight into where money is going.
We have found that business owners don’t pay attention to their finances as much as they should. In fact, many business owners rely solely on the amount they see in their bank accounts to make financial decisions, which can get them into trouble.
If your business is constantly struggling to cover expenses, even when revenue looks strong, chances are you’re making one (or more) of these common cash flow mistakes. The good news? They’re all fixable.
Mistake #1: Relying on Revenue Instead of Profit – More Sales Won’t Fix Cash Flow
Many business owners believe that as long as revenue is growing, their cash flow should be fine. But bringing in more money doesn’t help if your expenses are growing just as fast and it doesn’t guarantee cash in the bank.
The problem:
- You’re landing big deals or selling more, but there’s never enough cash to cover expenses.
- You spend money on fulfilling orders or services before you get paid.
- The more you grow, the more financial stress you feel.
Fix it:
- Focus on high-value products or services that bring in more money without extra work.
- Take payments up front and/or speed up your invoicing so cash comes in sooner.
- Before taking on big new projects, make sure you can afford the upfront costs.
📌 Pro Tip: Revenue is vanity, profit is sanity, and cash flow is reality. If your business is growing but you’re constantly cash-strapped, it’s time to look at where your money is going.
Mistake #2: Ignoring Accounts Receivable – Sending an Invoice ≠ Getting Paid
Most business owners assume that once they send an invoice, the money will magically appear in their account. But that’s not how it works.
The problem:
- You’re not tracking unpaid invoices consistently.
- You don’t follow up on overdue payments fast enough.
- You don’t have repercussions for late payments.
Fix it:
- Implement a structured follow-up system—send reminders before, on, and after the due date.
- Use accounting software, or a spreadsheet, to track outstanding invoices.
- Set clear payment terms upfront—consider deposits or requiring partial payment before starting work.
📌 Pro Tip: If you’re waiting more than 30-60 days for payments, your clients are using you as an interest-free loan. Time to tighten up those policies.
Mistake #3: Paying Bills Too Fast (or Too Slow) – Timing Matters
When it comes to expenses, timing is everything. Paying too quickly can use up cash that you might need for other expenses, while delaying payments too long can damage vendor relationships.
The problem:
- You pay bills as soon as they hit your inbox, leaving less cash available for other expenses.
- You delay payments too long, risking late fees or strained supplier relationships.
Fix it:
- Align payments strategically so you have the cash you need for your other expenses and your bills.
- Negotiate longer payment terms with vendors to give yourself more breathing room.
- Use a cash flow calendar to see and plan outgoing payments wisely.
📌 Pro Tip: If you can get Net 30 or Net 60 terms from vendors, it keeps cash in your business longer.
Mistake #4: Unchecked Overhead Expenses – Small Expenses Add Up Fast
It’s easy to justify a $50 monthly software subscription or an extra office expense here and there. But over time, these “small” costs add up and can cause a major cash drain.
The problem:
- You’re paying for tools, software, or services you don’t actually use.
- You haven’t reviewed your recurring expenses in months (or years!).
- You’re overspending on office space, equipment, or non-essential perks.
Fix it:
- Review expenses quarterly—categorize every cost as essential, negotiable, or unnecessary.
- Cut or downgrade services you don’t use regularly.
- Look for opportunities to renegotiate contracts or switch to lower-cost alternatives.
📌 Pro Tip: Before making a purchase, ask yourself: “Does this directly contribute to revenue generation?” If the answer is no, reconsider.
Mistake #5: No Cash Flow Forecasting – Flying Blind is Dangerous
If you’re making financial decisions without knowing how much cash will be available next month, you’re operating on guesswork—and that’s risky.
The problem:
- You don’t have a system to predict future cash flow.
- You rely on bank balance or historical revenue instead of a future forecast.
- You get blindsided by seasonal dips or unexpected expenses.
Fix it:
- Create a cash flow forecast to see what’s coming in and going out.
- Monitor seasonal trends to prepare for revenue fluctuations.
- Use financial software or a simple spreadsheet to track projected vs. actual cash flow.
📌 Pro Tip: Aim to have at least 3 months of operating expenses in the bank to cover shortfalls without panic.
Final Thoughts
Cash flow problems aren’t a mystery and as we mentioned earlier, they’re fixable. If you find yourself facing cash flow issues, the first thing you should be doing is tracking where your money is coming from and where it is going.
So many business owners never run or read their financial reports. Work with your bookkeeper or accountant to better understand where your business stands financially and make a plan to prepare for the future. With good cash flow planning, you will be able to run your business with clarity and confidence.
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