4 Stupid Financial Moves To Avoid in 2024
By: Ruth King
Here are four stupid things owners and bookkeepers do. Resolve not to do them in 2024.
- Not putting 1% of all cash coming in the door in a separate savings account.
Whether it is busy or slow, you definitely won’t miss the 1%. If you have a deposit of $5,000 and you put $50 in a savings account, that still is $4,950 to use for operations. Put the money away!
Every little bit added to the savings account means that you have money for unexpected cash needs in slower months. I’ve also seen business owners who use the savings account to purchase computers, trucks, and other assets rather than borrowing from a bank.
- Not putting your project deposits, maintenance agreement sales dollars, and warranty reserve dollars in an interest bearing account.
Many companies receive a deposit before they begin work on a project/replacement. Sometimes these deposits are for work that isn’t to begin for many months. The dollars you receive for future work should go in an interest bearing savings account until the work begins. You have a liability to perform and this liability is shown on your balance sheet. You can take it out of a savings account when you perform the work. However, if you don’t need the cash for operations, then leave it there. When it gets busy you probably won’t need it so keep it in savings for a rainy day.
Likewise, when you receive money for maintenance agreements in advance, that money is not yours until you perform the work. It is a liability to perform. Put it in a savings account. You can take it out of a savings account when you perform the work. However, if you don’t need the cash for operations, then leave it there. When it gets busy you probably won’t need it so keep it in savings for a rainy day.
A small portion of each installation job (1% of equipment cost, for example) is warranty expense to cover future warranty issues. These dollars should go into an interest bearing account until the warranty period is over.
- Not contacting the accounts payable department of a new customer.
Unless you know exactly how to send in an invoice so that it is paid on time, then making an introductory call to a new customer’s accounts payable department is critical.
This is the best time to get to know people in the department. You’ll discover exactly what needs to be on the invoice so that it doesn’t get “kicked back” and you’re waiting 30, 60, 90 days or more just to find out that your invoice was missing something!
- Not billing.
You’ve performed the work but don’t have time to (or make the time to) bill it. The reality is that the work isn’t complete until all paperwork, including billing, is done. If a customer doesn’t get a bill until months later, they may “forget to pay the bill” or question the work that was done. Even in busy times you’ve got to bill. Overtime is justified in this case.
Cashflow is the life blood of your business. Make sure you don’t make these mistakes in 2024!
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Ruth King is known globally as the “Profitability Master,” and is a a thought leader in entrepreneurship and business. Her books have been recognized as among the greatest in numerous industries. Learn more about all her business activities here.
