Is your business leaking money?

By Nina Kaufman, Esq.

As seen in …


Tired of running out of money no matter how much you make? As my client Danielle complained,

Why does it seem I can generate several million dollars a year … and STILL never have enough money in the bank?

So what’s the solution to managing those cash flow ups and downs?

Good systems, strategic planning, and wise behavior.


Money doesn’t breeze its way into your business. You have to ask for it. And keep asking for it until you collect. Having good systems in place ensures you receive what you deserve.

You ask for it by sending invoices. Seems simple enough, but it’s surprising how few small business owners make this a habit. “I’ve met thousands of small business owners,” says Professor Dawn Fotopulos, award-winning author of Accounting for the Numberphobic. “and often, their invoicing disciplines are horrendous. Women business owners are particularly bad at this. They’re so eager to get the sale, they ‘ll take months … I have seen years … to pump the invoice out.”

Once the invoice is out the door, following up on payment becomes crucial. “Being a great [fill in the blank] isn’t good enough if you’re going to stay in business,” Fotopulos warns.

Knowing the payment process of your clients is key to getting paid timely. What information do they need to see on the invoice? Is there a specific form that’s required? How many layers of approval process?

Fotopulos encourages business owners to get that inside scoop from the person in charge of cutting the check. For example, your client may cut checks for invoices over $5000 only once a month (because of extra sign-off requirements). But it issues everything $2500 and under weekly. So what are you going to do with that $10,000 invoice? That’s right—break it into 4 weekly invoices of $2500.

Finally, if you’re waiting longer than you should to get paid, don’t hold back—but don’t expect the worst, either. There may have been data points that didn’t match up. Like an invoice number corresponding with a statement of work. Without that information, your invoice can end up in a black hole. Which no one will tell you. So ping them with, “Is there any other information you need from me to make paying this invoice easy for you?

This kind of follow up ensures good business hygiene within your company.


Small business owners tend not to have a clear picture of how their business ebbs and flows. Is there a big push toward year-end (as in the retail industry)? Do you find a drop during summer? Cash management and budgeting takes strategic planning. When you don’t budget, you have no idea how to even out the ups and downs. Without a budget to cover the slow cycles, business owners will draw on credit lines to shore up operations.

That’s where leaks come in. “If you’re expanding through an acquisition, purchasing a new building, or creating a new division in your company—and you know how you’ll get ROI, and have a plan to pay back the funds– great!” says Sacramento-based profit and money coach Elena Forbes. “But businesses take out credit lines because cash flow is inconsistent. Or they’re not future forecasting to know when they’re going to need that money … so they spend it.

Without a plan to pay it back, the loan and interest fees keep racking up.

Forbes teaches her business clients to have an emergency savings account and a cash investment account. She also uses “floors”—a bottom limit (NOT zero) below which your accounts may not drop. Many business checking accounts institute that as part of their program. They’ll charge you if you fall below. “You have to have a cushion,” says Forbes.


There’s a human element to business … and to business owners. Money finally comes in. We’re flush. We have breathing room. And we say, “I’ve worked very hard for this money. I’m going to get myself a toy.” We make more, so we spend more.

In the leaner days, you might treat clients to lunch at the little sushi place around the corner. But now, it’s dinner at the steakhouse with bottles of wine. We’re bigshots now, so have an image to uphold. And once we’re locked into that pattern, it’s hard to break.

Those expenses add up real quick,” says Inbal Sakas, founder of the NYC professional bookkeeping firm F.A.R. Experts. She cautions business owners don’t spend just because you can. In other words, if it’s not essential for the business, or there’s not a direct ROI for it, don’t do it (tempting as it is). There’s a cash implication for all these expenditures.

A similar area of leakage is in the realm of owner compensation. These are the little perks that owners put through the business. Like payments for the automobile, that used for both business and personal reasons. Meals with friends who aren’t true business associates. Personal credit reports. All legit—as far as the IRS goes.

But when you start adding that up, it’s often surprising how much owners withdraw from the business. No wonder there’s a cash flow issue! Your bookkeeper may be tracking the numbers, but not analyzing them. Sakas quipped, “Managing your cash flow is like being on a diet. You won’t know how many calories you consumed today until you actually count them.”

What causes money leaks is usually not a surprise. It results from inconsistent systems, poor planning, and short-term personal choices.

The good news is, it’s fixable. Turning these matters around will help you keep more money in your business … and your pocket!


  1. Invoice like clockwork. Same time (or times) every month.
  2. Collections. Have a regular calendar for follow-up on payments. What you’ll do at 15 days, 30 days, 45 days, etc.
  3. Read your financial statements every 1-4 weeks. Understand how the P&L, Balance Sheet, and Cash Flow Statement provide you with a full picture. Your bank statement alone doesn’t cut it.
  4. Take taxes into account when counting available cash. You may say today, “I’ll catch up next year” … but most business owners never do.
  5. Have metrics for marketing. Track your ROI for each approach so you’ll know what’s paying off, and what you can stop doing.
  6. Know your direct labor costs and overhead per project so you can gauge profitability.
  7. Analyze line items every quarter. You may have signed up for recurring billing on items (like SaaS payments) that you’re not using. These add up.

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