7 Crucial Cash Flow Mistakes Female Entrepreneurs Make
Do you feel like time is running out for you and you can’t afford to make more mistakes in your business?
If so, then this article is for you.
In it, I am sharing with you the 7 crucial mistakes female entrepreneurs make while MANAGING their business. I found them through my interactions with female entrepreneurs across the world running businesses across diverse industries at different scales.
These mistakes and the ways to avoid them are also rooted in my work over the years with ambitious entrepreneurs as a financial coach running businesses from £40k to £40m in revenue.
7 Crucial Cash Flow Management Mistakes of Female Entrepreneurs and How to Avoid Them
Let’s start with the first big mistake female entrepreneurs make.
Mistake 1 | Lack of Financial Know-How
Many female entrepreneurs think they could have managed the financial side of their business well if only they had an MBA or an accounting or finance degree.
And, because they don’t have those degrees or an MBA they keep running from numbers in their business.
Good financial know-how in business means more than knowing how much tax you need to pay.
Financial know-how gives you clarity and confidence where you are right now in your business in terms of sales, profit, and cash position.
And, if you are not where you want to be, financial know-how tells you what to do about it to get to where you want to be by developing a financial growth strategy.
Many entrepreneurs talk about business strategy. I believe it’s pointless without having a financial strategy in place. Without financial competence, you will not be able to develop a financial strategy. Because you need cash to run the business and implement your business strategy. So successful implementation of your business strategy needs financial know-how.
If you think your financial know-how is not up to the mark, then invest time and resources in developing it. It will pay you dividends in the future. Work with a coach or an established expert if you have to for this.
I believe the ability to grow your business in a profitable and sustainable way requires financial know-how, otherwise, you are just leaving your success to chance, which rarely works out.
Mistake 2 | Thinking It’s OK to Spend Because There Is Money in the Bank Account
No. It’s not.
Even when many women entrepreneurs make major spending decisions based on how much money is in their bank account. They tend to forget that a business collects tax on behalf of the Government. So, some of the money in their bank account is not theirs.
That is why it is important to have a clear understanding of your true financial position. Without this understanding, it’s easy to make bad business decisions that can send your business on a downward spiral.
Mistake 3 | Not Having a Cash Runway
This is one of the biggest mistakes female business owners make. Julia Pimsleur, the author of Million Dollar Women, in her research for the book, learned that women are twice as likely as men to shut down their businesses because they run out of cash.
I have seen this over and over in my career over the past 17 years. Business owners continue relying on the ongoing cash flow for safety and survival. But the COVID crisis has shown everyone that this can be a fallacy and incoming cash can dry anytime.
Better to have a cash runway at all times in your business.
You can better avoid this issue by working with an advisor on your cash flow projections or finding a financial coach who can walk you through your numbers. Don’t be afraid to ask for help or say you don’t understand, and be sure to look at what you owe and what is owed to you on a weekly basis so you can have a healthy cash balance.
Mistake 4 | Not Getting Professional Help on Time
You can avoid most cash flow mistakes just by working with a professional.
This is such a simple thing to do but many women entrepreneurs don’t do it. A professional or a coach can guide you on how to look through your numbers and build an understanding of the health of the business.
There will always be things that you possibly don’t know and can’t see. By the way, these two things are the biggest killers in the business.
Have you ever come across a situation, “Oh I didn’t know and I have been losing money as a result of that ignorance or how about, I didn’t know I could do that and make more money without making more sales?”
A good coach works with you as a front seat co-passenger or as a co-pilot guiding you through the rough bumpy rides in terms of lack of cash flow or leveraging your existing cash flow so that you can survive when times are tough and thrive when times are good.
Mistake 5 | Not Tracking Your Marketing Spend Properly
Marketing is one of the biggest expenditures for growth-oriented companies. Even then we don’t take time to understand which marketing channels are performing well for your business.
This is super important to know because you want to deploy your resources in places that give your good returns and use that to grow your business. Without it, you may be stuck where you are for a long time.
Mistake 6 | Not Keeping an Eye on Cash Flow at All Times
When you don’t keep an eye on cash flow, you may end up with insufficient cash flow. And if in such times a crisis strikes, you will have to start looking at external funding which is hard to come by in tough times.
Even when you get external funding, it will come with high-interest rates and this is not the cash flow situation where you want to be.
Mistake 7 | Not Having Systems and Process for Effective Credit Control in Place
Not having a system and process to collect the payments from your clients is a mistake that can be easily avoided.
Think about it, you could have cash in your bank account without making extra sales and you can use the funds to invest in your business growth.
From my work experience, what I have found is female entrepreneurs focus on sales and forget to keep an eye on a collection of payments.
If you are in this situation, here is what to do to fix this.
Build your internal process to send the invoices on a particular day. Make supplier payment on a dedicated day of the week. Also, follow up with clients on a dedicated day. There are apps like Float, Fluidly, Pulse, and Chaser that can help to save time and the hassle to automate this task too.
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If you like videos more than words, then I published a video with the same content, you might want to check it out below.
