Why basic financial planning is essential for business cash flow

Basic accounting and bookkeeping is essential for all businesses - but especially small businesses.

I asked Seth David of Nerd Enterprises "what is the number one accounting and cash flow mistake that all small businesses make?"

The biggest mistake I see businesses make is that they don’t plan. When I moved to California I was living in a half way house. Before I took a job, I had to add up what my expenses were going to be each month so that I could see what I needed to earn at a minimum to live.

It wasn’t much, but if I just went and took a job without knowing, I could have found myself in a situation where I wasn’t making enough money to pay my bills. So when I sat down in the first job interview I already knew what I needed bare minimum. I padded the amount in case I may have missed something, and in all likelihood I would need to add expenses along the way.

Of course I wanted to further pad that so that’s where the negotiating comes in. When I am looking at jobs I know I need to look at jobs that are paying at least as much as I need at a minimum.

Now let’s say I find that for what I do, jobs simply aren’t paying that much. I have to go back to my budget and adjust the income based on what I think I can get. From there I look at the net to see if I am short and if so by how much.

If I am short I have to make adjustments somewhere, starting with things I don’t really need and then seeing if I can live with “less” of the things I do need.