For trading businesses, in order to reduce the mistakes in financial planning and cash flow forecasting, they have to do account for VAT properly, not include depreciation as an outflow, to measure or control the time it takes to collect from debtors accurately, and to not under estimate the risk of bad debts. And they also have to be sure about the impact of stock and how it is valued or included in a cash flow. Similar to the trading businesses, for service businesses, they should account for VAT properly, do not include depreciation as an outflow, should measure or control the time it takes to collect from debtors accurately, and should not under estimate the risk of bad debts. Besides that, they also have to be able to understand the impact of work in progress on their cash flow.
On the other side, there are some common mistakes produced by businesses for profit companies and businesses not for profit companies. The common mistakes that usually done by profit companies are they usually over estimate the profits and hence cash that the business can generate. Besides that, they also ignore VAT and taxes as part of their financial planning. They believe that banks will bail them out if they get into trouble with no cash, and believe that the creditors will provide credit. Meanwhile, for the nonprofit organizations, they usually ignore proper financial planning as they don’t make profits. They also believe that VAT and taxes do not apply to them, and suitable credit ratings do not apply to them as they are not a commercial business.