Control of your cash flow is a key element of running a well oiled business. With a firm grip on the way cash moves in and out of your company, as well as a clear eye on the way your profit might fluctuate, you’re ten times as likely to reach year two as a business owner.
And while your cash flow may be negative for a good while yet, planning for this to change is part of keeping control. The market may often be unknowable, but understanding your place in it definitely helps!
So let’s go through a few things that’ll help you control your cash flow when you’re just starting out. Don’t let the idea of financing and falling into debt get on top of you. You’re going to see greens in your profit margin in the future, but you need to have a clear overview of when that’ll happen right now!
Look into Various Financing Methods
The more finance you have for your business before you’ve even properly established it, the better your chances of reaching year two. Indeed, the more money you have to ‘start up’ with, the more choices you’re going to have at your disposal.
So make sure you take this time right now to look into various financing methods. From having a pot of your own savings to crowdfunding amongst friends and family to getting a traditional business loan from your bank, there are quite a few ways to fund yourself and get a budget up and running.
What you do with that money from here on out, however, needs to be carefully considered.
Write Up a Forecast for at Least a Year Ahead
A cash flow forecast is your best friend. Really! If you know what to expect from your sales over the next 12 months – even if the future can be unpredictable – you’re going to make better business decisions all round.
Indeed, you’re going to be able to budget for most of your expenses without needing to break the bank or take out short term loans when you overspend. A bit of foresight really does go a long way.
And this works for all businesses. From small tattoo studios looking to invest in the best rated tattoo ink to medium-sized real estate enterprises trying to diversify their portfolios, your cash flow for the year ahead gives you a road map to follow.
Work with an Accountant
An accountant can be a great hire within the first year of operating as a business. You can also choose to outsource to a freelance accountant, if you so desire, just as long as you have this financial muscle to back you up.
Having an accountant on your side can make cash flow reporting, book balancing, and expense handling a lot easier. No longer are you the one who is entirely responsible for financial decisions; you have an accountant around to give advice whenever you need it.
And this advice can range from one side of the equation to the other. They can help you understand what risks you’re taking on, what your current cash flow means for you, and how you can improve things to see green in the future.
Don’t Panic About Being in the Red
Being in the red is common, like we mentioned earlier. However, people still panic about it and come to all kinds of disastrous conclusions in their head. Don’t let yourself be one of these people.
A red cash flow, or a negative cash flow, doesn’t mean everything is going down the drain. You’re simply dealing with a lot of expenses right now, but things don’t have to remain this way! All in all, don’t let the panic take hold and convince you your business is done for before you’ve even got started.
Control Your Cash Flow or it Will Control You
Controlling your cash flow in the first year of business isn’t an easy thing, and don’t let us trick you into thinking it’s going to be! However, it is a manageable thing, and it’s something every new business owner should invest time and effort into doing.
Why? Because the more you know about the way the future may look, the less unnecessary financial risks you’re going to take. Cash flow can tell you a lot about the way you’ve performed, but it can tell you more about how you’re going to perform – spotting a trend now can save you from liquidation later on.
