“If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur.” - American oil well firefighter, Red Adair, 

As newly-minted entrepreneurs, there are some Cash Flow-ruining accounting mistakes that you need to know to safeguard and improve your receivables performance management. These include not being able to comply with your payroll taxes on time, implementing low prices to your goods or services, and relying on a single source of revenue.

Here are 10 of the most common accounting mistakes that rookies like you are likely to commit.

Rookie Accounting Mistakes

Rookie Mistake #1: Getting a loan when you don’t really need it.

With the advent of startups, banks often offer great deals to entrepreneurs to help them get started. Getting a loan can be a good way to build your credit portfolio, but just because the bank is offering you a loan doesn’t mean it is wise to accept.

Remember, loans come with interest, and it is more of an expense rather than support.

Rookie Mistake #2: Advanced hiring prior to revenue.

Don’t count your chickens until they hatch. Just the same, don’t count your income or revenue until they’re in your hands or the bank.

Many startup entrepreneurs make the mistake of hiring in advance over the promise of revenue through a job order. Hiring is an expense. So, make sure you’re ready for it.

Rookie Mistake #3: Setting low prices.

Remember, you’re a business not a charitable institution. The goal is to grow your nest. Selling more items at low cost does little to improve your receivables performance management compared to selling fewer items at reasonably high prices.

If you start with very low prices just to attract customers, you are setting yourself up for a trap because increasing your prices in the future will become harder if you start off too low. Do your research and visit competitors to get a good grip on competitive pricing ranges.

Rookie Mistake #4: Offering credit without good reason.

Keep in mind that when you offer credit to customers, you automatically become more than just a service or product provider—you also become a bank.

Many businesses hit a wall due to uncollected receivables and mismanagement of Cash flow. Unless it is absolutely necessary, do not offer credit to customers. But, if you do, make sure you have an efficient receivables collection process in place.

Rookie Mistake #5: Having only one source of revenue.

Many people think that focusing on just one business is better than managing two. Many successful business people start out with only one or two enterprises, but they soon branch out and create more income-generating ventures. Don’t put your eggs in one just one basket.

Rookie Mistake #6: Factoring your invoices.

Factoring invoices help you get up to 90 percent of your unpaid invoices’ value through a third-party vendor who will collect the money on your behalf and give you the balance once it is paid minus an agreed professional fee.

While this sounds like a good idea, after all, you are hiring someone else to do the chasing for you. In the end, it’s not as helpful as it seems.

First off, factoring invoices is still borrowing, and it comes with a cost. Second, letting a third-party handle what seems to be your “dirty laundry” can cause you to lose control of your cash flow and even your debt management.

Rookie Mistake #7: Not hiring a professional accountant.

Unless you’re an accountant yourself, not hiring a professional to manage your books can cause you more expenses in the long run than save you money. It is vital for entrepreneurs to know the ins and outs of their cash flow and revenue management.

However, delegating the daily accounting tasks to a professional will enable you to focus on growing your business rather than spending hours counting how much you spend and how much you earn.

The important thing you need to remember is to have an open communication with your accountant, so you are both on the same page. Trust, but don’t depend.

Rookie Mistake #8: Not keeping business and personal receipts separates.

In the beginning, startup entrepreneurs, especially the “Mom-and-Pop” variety often mix business and personal expenses. Then again, these two need to be separated after some time.

Apart from ruining your cash flow, not having an organized receipt management will be harder for you when tax season arrives.

Rookie Mistake #9: Getting cocky over a consistent cash flow.

Just because you’re making money doesn’t mean the venture is downright profitable. Remember that your cash flow is like a two-way street: there’s a way in and a way out.

Before you celebrate, deduct your expenses first. Moreover, innovate. Just because your product or service is hot right now doesn’t mean it won’t lose steam.

Rookie Mistake #10: Forgetting your cash obligations.

To avoid penalties, make sure payments are made on time. Don’t get too fixated on the money that comes in because you will need to let go some of it due to expenses and other cash obligations.

Avoiding the Rookie Traps

Setting up a tailor-fit and efficient accounting system for your business can help you avoid these rookie traps. As with most systems, you need time to shape the kind of system that works well for you and your team.

Once it has been setup, your business can become a well-oiled machine, and you can focus on opening more income-generating ventures.