5 Reasons Why Your Business Might Go Under

5 Reasons Why Your Business Might Go Under

Let’s say business is booming. Customers are coming, clients are happy, and you’ve got projects left and right. This could only mean that you’re bound to be on the right track, and you’re headed for growth. It would certainly indicate that your business is well on its way to becoming more than what it already is.

Why then don’t the sheets and your bank account say the same?

Profitable businesses have made common mistakes that could seriously hurt their chances of growth and development, but you don’t have to fall for the same traps. We have outlined these errors and listed down tips to help improve cash flow for your business.

The Wrong Focus: Profits VS Cash Flow

Ask yourself, where do you want to focus on? Profits or cash flow?

A person who has no previous experience with handling a business would answer profit in heartbeat. After all, isn’t that why you set up a business in the first place?

While it is the goal of businesses large and small, making profit shouldn’t be the sole focus. It is also worth focusing on cash flow. Without having enough funds on hand, you are likely to run into trouble when you can’t pay off debt, suppliers, and the salaries of your employees.



When you have a potentially big order or project coming up, take into consideration when cash flow will be available. Sometimes this new project can spell trouble if you have no idea how to handle your finances properly. While this new order has the makings of helping your business expand, don’t get too caught up with the idea just yet. Most likely a project this big will take some time before it is finished so make sure that you have the funds to weather things out before you get fully paid.

As business expansion becomes possible, always make it a point to balance profits with your cash flow.

Failure to Make Follow-Ups

Whenever a service or product is delivered to a customer, it is only fair that payment is followed up as soon as possible and in a consistent manner. Failure to do so will affect your cash flow, and many business owners are still guilty of doing this to the point of going bankrupt.

Getting the help of a professional debt collection agency will lessen the amount of work you need to do. JMA Credit Control can do the following up for unpaid invoices and make sure that full payment is made.

Inconsistent Payment Terms

There is a delicate balance between paying suppliers and the payment you expect to receive from customers. If you are unable to balance to two, you will end up being burdened with cash flow issues that could have easily been avoided.

Learn how to negotiate flexible credit terms with suppliers while still being able to demand payment from clients in a timely manner.


Poorly Managed Invoice Recording

If you have no idea who owes you payment, how much, and when they are supposed to be due, then you’re setting yourself up for future financial troubles. Make it a habit to send invoices as soon as possible and make automated reminders to clients when payment is almost due.

It would also help to have professionally written terms of trade read and signed by you and the client before moving forward with a transaction. Such a contract should be able to outline how much is due, when the due dates are, and what happens when late payment or non-payment occurs.

Lack of Credit Management Skills

Thinking of offering store credit to valuable clients? Not so fast there.

Even if you have done business with a client many times, it will still be wise on your end to do a bit of background checking first. Old or new, clients that you have intentions of offering credit to should undergo a thorough review of their credit history first. Checking out someone’s past transactions and payment habits will help you gauge whether one person is worth offering credit to or not.

If you don’t do some background checking of your own, you run the risk of getting a deal with someone who has a habit of paying late (or not paying at all).

The Bottom Line

The goal of seeing your business grow should be consistently met with good business practices, such as offering terms of trade, doing background checks on potential clients before offering credit, and properly managing invoices.

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