As a CFO, I often get asked about the most common causes of cash flow problems. Here are the most common issues small businesses run into:



1. Too much inventory
2. Too much salary or too many withdrawals to the owner
3. Doing business with customers who are slow paying or do not pay at all
4. Overhead too high
5. Too Much Deb
6. Unexpected expenses
7. Undercapitalization from the beginning 
8. Employee Theft
9. Excessive purchases of fixed assets and capitalized costs
10. Operating Losses
11. Paying bills too quickly
12. Selling prices/profit margins too low and not knowing what your product or service costs

Take a look at this list. Which area do you think is your biggest cash burner? Even if you do not have a cash flow problem you should assess your risks in all of these areas. If you do have a cash flow problem you should assess which areas are burning the most cash and work to address it.