Doing Business in the Philippines: 5 Cashflow Mistakes that Ruin Startups
It costs money to operate a business. Of course, we aren’t only talking about raw materials or product acquisitions. You have to pay rents, water, electrical, internet bills, etc. and you can’t say no. Otherwise, the operation of your business will stop. Managing cash flow is a skill that every company must have in order to sustain.
Startups have a tendency to overspend on a lot of things that when left uncontrolled, will badly hurt the cash flow. So what are these things that you should be aware of? They are the following:
Forgetting Your Tax Date Dues
Forgetting to pay your taxes on time would mean penalties that will increase the costs for your company. Business establishments, including startups, must have appropriate provisions on your business plan for taxes every year. It should be properly estimated and scheduled.
Note the important dates for your company in a calendar so you will be reminded of important things like your tax date payment.
Overspending on Customer Acquisition
As a startup business, you would want to have more potential customers. But wait. You have to remind yourself that these potential customers will not equate to actual sales unless they make their purchases. Also, we still don’t know how much and how often they would make purchases. So in the meantime, while you’re figuring that out, set a limit on your provision for business growth as stated on your business plan. If you overspend on your business growth, your cash flow could be affected. For example, if you don’t have money anymore to pay your electric bills, you will be forced to change a business loan.
Wrong Computation of Projected Profit
One of the most common cashflow mistakes is the wrong projection of profit.
Sometimes we oversee things when we compute for our projected profit. For example, if our business is a bakeshop making cakes, we might only think of the cost of our ingredients and the salary expenses. However, we may realize in no time that there some factors that we are forgetting like the gas usage for baking the cake from our oven, the electricity consumption as while we’re baking, we’re also using electricity for the light and some other baking electrical tools and equipment.
We must list down as many factors to consider on arriving with our projected profit. Otherwise, we will have lesser profit than expected and unfortunately, it will greatly affect our cash flow.
Not Preparing for Natural Disasters
Some acts of nature could happen beyond our control. It could be an earthquake, storm, or others.
The truth is, we really don’t know what the future holds. It would be helpful if even we’re just a startup business, we’re already prepared for this.
Buying some insurances and having some contingency plan would be of great help. Otherwise, it would badly hurt our cashflow when natural disasters come as we need more money again to rebuild our business.
Hiring the Wrong People
We hire people believing that they are the ones who will be the instruments to meet the company objectives. But what if the people we hired could not even achieve 50% of the objectives we set up for our monthly sales, let’s say. If this is the case, we don’t have any choice but to let go of these people.
We should think about and write the procedures for hiring in order for us to get the right people especially when we are just a startup business as we don’t yet have plenty of experience in hiring employees. If we spend a lot on the hiring process, it will affect our cash flow as more money will be given to that.
Don’t be too afraid of making mistakes. The mere fact you’re reading this article means you want to prepare yourself for things coming to your business. Do you need further assistance on how to avoid Cashflow Mistakes for your company? We at 3E Accounting for would like to help. You can contact us if you want to start a business in the Philippines.