Cash flow mistakes business owners make and how to avoid them

Cash flow is one of the biggest challenges business owners face — especially contractors and small businesses here in Bergen County, NJ. Often the problems come from habits that many owners share. The good news: once you know what’s causing those issues, the solutions are usually simple and effective.

1. Depending on inconsistent income to cover consistent expenses

Many business owners wait for invoices to clear before paying rent, software, or contractors. That makes cash flow unpredictable and often stressful.

Do this instead: Build a one-month cash buffer so you can cover bills on time — even if customer payments come late. For example: if your monthly expenses are $4,000, aim to keep at least that amount untouched as a safety net.

2. Letting overdue invoices sit without follow-up

Delayed payments slow down cash flow. Over time, thousands of dollars can sit unpaid simply because invoices were forgotten or not chased.

Do this instead: Automate or schedule invoice reminders so payments come in more consistently. Even a short follow-up every seven days can make a big difference.

3. Making decisions based only on your bank balance

Your bank balance doesn’t account for upcoming bills, taxes, payroll, or subscription renewals. Relying only on that number can lead to overspending and unexpected cash shortages.

Do this instead: Review a full cash flow report before spending. That way, you know what’s truly available after future obligations are accounted for.

4. Waiting until tax season to save for taxes

Putting off tax savings until the end of the year often leads to a cash crunch and stress when taxes are due.

Do this instead: Automatically set aside a small percentage of every deposit into a separate savings account. This way your tax fund builds gradually and you avoid last-minute surprises.

5. Mixing personal and business expenses

Combining personal spend and business money can blur the picture of your company’s financial health. It complicates bookkeeping, taxes, and planning.

Do this instead: Keep personal and business accounts separate. That clarity helps you track cash flow properly, simplify your bookkeeping, and make smarter financial decisions.

Final Thoughts

Cash flow issues don’t necessarily mean you’re not making enough money. Often, they come from habits and missing systems. When you implement good practices and reliable processes, your cash flow becomes more stable, predictable, and significantly less stressful.

If you’re ready for greater clarity and consistency in your business finances — whether you’re a contractor, painter, roofer, or real estate investor Bergen Bookkeeper can help you track your cash flow, and build a financial foundation made for growth.

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Frequently Asked Questions about Cash Flow for Small Businesses in NJ

Q: How large should my cash buffer be?

A: Aim for at least one month’s worth of fixed expenses. Once that’s in place, consider expanding to two or more months for added security especially if your work or payments are seasonal.

Q: How often should I follow up on late invoices?

A: Every 7–14 days is a good rhythm. Using automated reminders saves time and helps keep income flowing without needing weekly manual follow-ups.

Q: Should I create a separate savings account just for taxes?

Yes a dedicated tax-savings account keeps funds separate from operating cash, reducing the risk of accidental spending and preserving liquidity when taxes are due.

Q: Can I track cash flow with just my checking account balance?

A: No the balance doesn’t reflect upcoming costs like payroll, subcontractor payments, or bills. A proper cash flow forecast or report gives a more accurate view of what’s truly available.

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Photo by Ryan Quintal on Unsplash