One of the most important aspects of your startup is the cash flow. Cashflow is one of the ultimate deciders of business success. As a business grows, borrows and makes profit, it will begin to accumulate costs and income streams. All of these combine together to form cashflow. If you’re not in control of cashflow, however, you will soon find your startup falling down.
Cashflow needs to be there before a business has even the faintest whiff of profit, because cashflow keeps the doors of the start up open. The term itself defines the relationship between money that comes in and the money that goes out of a business. You need more coming in than going out obviously, but it is also important to be sure that money comes in on time so you can pay your overheads on time. If your overheads are not paid, then you definitely run the risk of losing money, as your debts accrue. And as debts accrue, you will find yourself facing an unbeatable wave of stress and pressure as you try to make enough money just to stay open as a startup.
But enough of the downside. Managed properly, cashflow can be a fluid and easy experience. Here are some tips on how best to manage your startup and it’s cashflow.
This is the killer. This is where you make a sale and send an invoice, and then don’t receive the money on time. This means your cashflow is directly affected and you lose out. If this happens enough times, you end up with a situation where no money is coming in on time because you haven’t developed systems that will help you deal with the problem. It can be a vicious cycle that only ends when you’re left with a dead business.
Find out why your invoice hasn’t been paid first before you go in with all guns blazing. It may have been mislaid by the customer, which is perfectly understandable. If this is the case they are usually happy to try and find it or ask for a replacement.
However, the longer you leave an invoice without being paid, the less likely it will be paid. So for your cashflow management, it is vitally important that you get on top of the problem, and monitor the invoices that are outstanding. By staying on top of this aspect of running your startup, you give yourself more chances of keeping the cashflow nice and steady.
Remember that lack of funds is the most common reason for businesses to go under. You don’t need that kind of hassle, so maintain an approach that keeps you in control of the cashflow you have in your startup. Always ensure invoices are paid as quickly as possible, and make sure you have an accurate log of all invoices and amounts owing.
Only by keeping on top of cashflow will you ever move towards profit. Otherwise, it’s just keeping the wolves from the door.