Cash Flow

6 Cash Flow Tips for a Startup

  • AUTHOR: Keith Tully
  • DATE: 08/10/2015

6 Tips for Balancing Your Cash Flows

Effectively managing cash flows is crucial for companies of any size and in any sector and startup operations are no exception.

Here are six tips well worth having in mind if you’re running a new business and aiming to strike the right kind of financial balance.

1 – Measure everything

When it comes to managing finances and particularly if you’re concerned about balancing your cash flows, information is extremely valuable and every detail should enter into your equations.

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There will often be a great many distractions for entrepreneurs and business bosses to worry about but it’s very important to remember that financial details really can matter. In short, the more detailed information on financial matters that you can access, the better prepared you’re likely to be as a business to cope with pressures and to make choices for the future.

2 – Limit costs wherever possible

The benefits of cutting or limiting costs as a business are obvious and they can be key to maintaining a healthy cash flow balance across your operation. There will be times when investments are necessary and when overheads have to be carried but limiting costs wherever possible can result in priceless financial flexibility for startups. In particular, sizeable and long-lasting financial commitments should be considered carefully and bosses should always make every effort to ensure that core costs are being kept as low as possible.

3 – Plan ahead and make projections

Cash flow difficulties can quickly go from being merely troublesome to being completely disastrous for startups that are unprepared. In simple terms, the more warning you can afford yourself and your company about upcoming cash flow concerns the better your chances are of emerging on the other side with limited damage having been done.

Financial projections can be extremely useful for this reason alone but also because they help highlight where issues clearly need to be addressed in time for positive steps to be taken and for serious problems to be avoided.

4 – Don’t plan for best-case scenarios

Startups and their founders tend to be optimistic and positive about the future but it is important not to be overly-optimistic or to assume that a best-case scenario will come to pass. It is much better in fact, from the perspective of cash flows at least, to plan for worst-case scenarios and to be as prepared as possible for any eventuality.

5 – Never forget the importance of sales

When cash flow concerns emerge it is quite natural to slip into a crisis aversion mode as a startup operator but it is essential not to overlook the importance of continuing to generate sales in these moments. The rewards for pursuing leads and securing sales might not be immediate but without them no fledgling business will be able to grow and cash flow problems might only be offset rather than resolved.

6 – Keep learning

As a startup founder it is virtually impossible to truly be prepared for every scenario that might emerge and cash flow problems can arise in ways that are completely unexpected and unavoidable. Such situations can be extremely testing but they can also be valuable learning experiences for those involved and for the companies that make it through to calmer waters and more sustainable scenarios.

  ABOUT THE AUTHOR:
Keith Tully

Keith Tully is a Partner at UK firm Real Business Rescue who specialise in corporate insolvency solutions and business finance. They are the UK's leading corporate recovery firm handling some of the most high profile cases of recent years. Keith has over 25 years' experience advising business owners and managers in times of financial uncertainty and writes numerous thought leadership articles for various publications.

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