5 Mistakes That Kill Your Company’s Cashflow

Managing cash flow is not simply reviewing your bank account balance; managing cash flow is finding those “silent” losses that are disrupting the payment cycle, delaying receipt of new income and creating uncertainty with respect to future financial planning. Businesses are unaware of many mistakes caused by their own actions that are affecting their liquidity. Identifying and correcting these errors early in the process will create a positive impact on business continuity and growth.

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1. Granting Credit to Customers Without Established Payment Terms

Extending credit to customers can boost sales, but offering it without clearly documented terms often results in delayed payments. Some businesses fail to define payment periods, charge penalties or confirm mutual agreement on expectations. This leads to confusion and inconsistent payment behaviour.

Solutions include implementing standardised credit policies, establishing written terms for each agreement that outline the due date for repayment, the amount of any penalty for non-payment, and the procedure to take if the customer does not pay. Templates and digital documentation platforms help keep this uniform and trackable.

2. Failing To Send Invoices Promptly

Delays in sending invoices will extend the time period that elapses before customers have paid their bills, thereby reducing visibility into future expected income. Businesses that fail to send invoices promptly after completing their obligation to deliver products or services to their customers will experience cash shortfalls, particularly where customers have established fixed payment schedules.

Digital tools that permit the prompt delivery of invoices reduce the likelihood of delays in collecting income owed to the business. Electronic invoicing solutions provide automated delivery of invoices, automated reminders and tracking of invoiced items, which all eliminate the possibility of manual delays and provide a consistent method of billing.

3. Failing to Monitor Aged Receivable Accounts

Businesses commonly believe that overdue accounts payable will resolve themselves. The fact is, the longer an invoice goes unpaid, the lower the probability of recovering the funds owed to the business. Businesses that do not regularly review their aged receivable accounts may lose sight of large dollar accounts that pose significant risks to the overall health of their business.

Regular ageing reports provide the ability to prioritise collections based on the age of the receivable account. Automated systems that produce alerts when the balance of a receivable account exceeds a predetermined threshold will minimise the reliance upon employee memory to follow up on past due accounts. Additionally, assigning employees the responsibility of collecting past due accounts increases accountability.

4. Relying on Manual Processes

Manual tracking of payments, approvals and reminders introduces errors. It’s difficult to maintain consistency across spreadsheets or handwritten notes, especially as the customer base grows. Human delays and mistakes often go unnoticed until a payment is missed.

Automated workflows reduce dependence on individuals. Payment reminders, recurring invoices and receipt confirmations can all be triggered based on set rules. These tools reduce errors and improve reliability.

5. Not Reconciling Accounts Promptly

Failure to reconcile payments with bank records can cause businesses to believe they have more cash than they do. In some cases, payments are missed entirely or duplicated. These gaps make it hard to manage outflows like payroll or supplier settlements.

Automated reconciliation features within accounting platforms simplify this process. They match bank transactions to invoices and highlight mismatches early. This ensures records stay accurate and decisions are based on actual cash positions.

Cashflow problems often stem from avoidable operational issues. When businesses delay invoices, rely on manual systems or overlook collections, they add risk to their financial health. Addressing these areas with clear processes and automation tools reduces that risk and provides better control over incoming payments. The right tools can offer functionality that helps maintain consistency, avoid delays and improve visibility across the payment cycle.