Episode A2.008 Cashflow

​Introduction

The old saying that cash is king' is never more accurate than when dealing with a startup.

When you first start a new business, it can feel overwhelming as you are surrounded by a multitude of things to do which includes all the back end operations, sales, marketing … you know what I am talking about here. Many times Cash flow takes a back seat .. which can be the biggest mistake and one of the causes of small business startup failures. 

Cash Flow or what is commonly referred to as Working Capital is the heart of any business,” “Without it a business cannot survive.
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As a startup, understand that a cash flow statement is a mandatory statement that records cash and cash equivalents that are coming in and leaving the company. The key function of the CFS is to let investors and lenders take a look at how your company's finances are being managed and where your cash is coming from.

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Show Objectives
In business, cash is always on the move. The cash flows into the account when customers pay for their purchase, when a loan is received from the bank or other source, interest is received or when any assets are sold. 
Cash flows out of the bank account when suppliers are paid, wages and salaries are paid; interest is paid to the bank and so on. 
The difference between the cash inflows and cash outflows during a specific period is known as the "net cash flow". 

Tips on Understanding Cash Flow as a Startup
Understand and record cash flow projections
Profit does not equate necessarily to cash
Unanticipated expenses and emergencies e.g. Covid-19
Marketing Expense exceed sales
Late payments can cause major cash flow disruptions
Faster Growth in the company

What to Do to Manage your Cash Flows
Spend slow and have it paced out
Outsource - Save on hiring costs
Pay Yourself First
Discount for early payers
Negotiate terms - both on Receivables and Payables
Use a Charge Card
Negotiate on everything in your business

A few more things 
Understand the cycles of your business and then use to forecast cash flow
Keep separate Business & Personal Accounts including credit cards
Pay your bills on time - On Time… not early
Get handle on your Invoicing and make sure you are paid on time
Lease or finance equipment including office and IT equipment
Build cash reserve and invest a portion back into the business
Get a Line of Credit
Look at hidden opportunities in your business
Revamp your marketing strategies to generate more sales
Understand the Slow seasons and use Social Media (if possible) to reach out to your customers
Understand your money - It is your money

Statistics
Overall, 90 percent of small-business failures are caused by poor-cash flow, according to Dunn & Bradstreet

According to the Receivables Exchange , small businesses now wait nearly 50 days on average to get paid

Shows
Previous: Episode A2.007 5 Steps to Grow your Business & generate more money

Next: Episode A2.009 Hiring Talent

Written by Raj Kapur

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