Start Up Tips: Managing your Cash Flow
We all know the saying: ‘turnover is vanity, profit is sanity but cash is reality’, but how many business owners quickly lose sight of this as their cash flow spirals out of control?
Cash flow is the lifeblood of all businesses, but it is critical for start-ups to get it right as otherwise it could be game over very quickly.
We share our top 5 tips to managing your cash flow…
Prevention is better than cure
Avoid cash flow forecast problems in the first place by using a cash flow forecast, it’s an important tool in helping you predict and manage your cash flow.
It will highlight cash flow problems that are likely to occur, whilst also letting you look at how various scenarios such as lower sales or delays in payments would impact your bottom line.
Download our template cash flow forecast from our Download Centre now.
Set a budget and stick to it
Most new ventures run on tight budgets and fledgling entrepreneurs often unforeseen problems will arise and throw their carefully constructed and frugal budgets out the window.
You’ll need to make sure your budget is realistic in the first place, get into the habit of monitoring and adjusting your financial plans to ensure you stay within the means of your business and ensure a healthy cash flow going forward.
Make sure you get paid
Set realistic payment terms for both you and your customers, and make sure they stick to them!
Establish strict credit control procedures, ensure you have your own systems in place to produce and send out invoices in a timely manner as well as chasing late payments.
If appropriate for your business, consider online payments as a way to make it easy for customers to pay you.
You could also incentivise customers to pay you quicker through offering them a discount on their next order if they pay within 7 days for example.
Control your costs
It might seem obvious, but keeping your costs down will reduce the likelihood of your business falling into cash flow problems.
Negotiate the best value deals from suppliers, monitor your spending weekly and look at ways in which further savings can be made.
Be careful when cutting costs however, drastic cost-cutting could have a negative impact on your business and can often involve some tricky decisions.
Keep in touch with your lender
It’s likely that you will need to access finance every now and again as your business grows. Keep communication lines open with your lender and develop a good relationship with them, should you need their support in the future, they’ll be more open to helping you.
If your business is growing, for example you’ve secured a big new contract – but need a cash injection to cover initial costs, you could access credit or a short-term loan.
Tweet us @ldbstartup and chat to our SUL team using our Let’s Chat Start Up tool. Simply copy and paste this link: https://app.purechat.com/w/s5pnt into another web browser and start a chat!