Most start-ups fail in their first year or two, and one of the biggest reasons for this is losing their grip on their cash flow, and running out of money. Obviously, you don’t want your business to be slung onto this particular body-pile. While some cash flow factors are out of your control, you can still protect your small business by managing your cash flow effectively. Here are a few tips for doing this.
Know Precisely When You’ll Break Even
Knowing when you’ll hit your breakeven point won’t necessarily have a major impact on your cash flow, but it will certainly give you a firm goal to shoot for, and a set target for forecasting where your capital should be going in order to reach this goal. If you can stay focused on this goal, and the various milestones you’ll have to hit in order to reach your breakeven point, you’ll naturally become much smarter about the ways in which you spend your available capital getting there. Simply put, keep your eyes on the company vision, rather than the money. Do that, and the money will follow you naturally.
Get Support Managing Your Funds
Unless there’s no way around it (which is extremely rare) you shouldn’t handle all your business’s money yourself if you can avoid it. This includes tracking the comings and goings, and handling your accounting. Just as you should be using an HR manager or contract tracking software to keep tabs on your employees and contractors, you should be using an accountant or some reliable bookkeeping software to manage your business’s cash flow. If you’re not able to hire an experienced accountant or CFO to deal with finances, then pick out a trusted employee who’s good with numbers, and make them the designated cash flow monitor. While you’ll still need to take a hands-on role here and there, passing your finances to someone else can make the whole issue much simpler.
Maintain an Emergency Reserve
Every small business that’s just starting out can expect setbacks and shortfalls. These happen to every start-up, even those with the best business plan in place. However, the survival of your business will depend largely on how you’re able to tackle those obstacles. When you have a decent cash reserve in place for those tough times, it will mitigate the impact, stress and distractions, letting you stay focused on the tasks needed to grow your business, and assure a bright future.
Rather than putting off recruitment drives until you need to, try to take a proactive approach to staffing your business, making sure that you hire smart. If you recruit the best talent out there, you’ll have highly skilled workers on board, who will be able to crunch through the work of two or even more poor or mediocre employees. Yes, you’ll spend a little more per worker than you may have planned on. However, this investment is bound to be less than what you’d pay for several, less effective workers, and almost certain to give you better returns.
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