One often overlooked cause of cash flow problems in small businesses is excessive salary or withdrawals by the owner. While it's natural for business owners to want to reap the rewards of their hard work, especially after periods of growth, it's crucial to maintain a balance between personal compensation and the financial health of the business.

When business is booming, it's tempting to increase your personal lifestyle, drawing a larger salary from the company. However, this can create a dangerous situation if there's a downturn in business. Many owners find it difficult to reduce their salary once they've become accustomed to a higher standard of living, putting strain on the company's cash flow during leaner times.

To avoid this pitfall, it's wise to establish a conservative and consistent salary for yourself as the owner. This approach allows you to maintain a stable personal budget while protecting your business from cash flow issues. During particularly profitable periods, consider taking a bonus instead of permanently increasing your salary. This strategy provides financial rewards for success while maintaining flexibility for the business.

It's also important to resist the urge to use your business as a personal piggy bank. Emergency withdrawals to cover personal expenses can put unexpected pressure on your company's cash flow. Instead, aim to build personal savings outside of the business to cover unexpected personal costs.

Remember, as the business owner, you set the tone for financial discipline within your company. By showing restraint in your own compensation, you demonstrate to employees and stakeholders that the long-term health of the business is a priority.

Ultimately, the key to balancing owner compensation and business cash flow is discipline and forward-thinking. By taking a more conservative approach to your own salary and withdrawals, you can help ensure that your business has the financial resilience to weather unexpected challenges and continue growing in the long term.