How to be cash flow ready when starting a business
Cash flow is one of the biggest pain points for businesses today, if not the largest. So, doesn’t it make sense to have a plan to get cash flow down before you start a business?
Timing is critical in business, particularly when you start first start out. After all, a customer paying you late could be the difference between you being able to pay your bills or not.
How are you going to insure yourself against this happening?
Business planning is perhaps the most important thing to do when you are starting a business.
You need to know your market, your goals, your strategies for various unknowns and you need to know your numbers.
You hear it so often – get a business plan.
It can seem like such a tiresome thing to do but it is honestly worth its weight in gold if you use it.
Make sure you think about things in your plan that may not be obvious. If you’re going to be GST registered, making sure you are aware of the ATOs BAS due dates.
Set up a separate bank account for things like GST so when the time comes to pay it, you have the money put aside.
This can cripple a business which has been going along under the assumption that 100 percent of their income is theirs. It’s not – 10 percent of this income is for the ATO.
Think of it like this: you are simply a clearing house for the ATO and they collect quarterly. This can hurt if you have spent everything in the meantime.
You may need to have a contingency plan for the “what ifs”.
What if production costs blow out? What if you need to purchase additional computers/machinery? What if you under quote on a job in your early days?
Consider arranging a line of credit that can sit there dormant not costing you anything unless you have a “what if”.
Talk to the various finance providers and see what you can arrange in advance. There’s nothing more stressful than having to scramble for money in the event of something unforeseen happening.
Get a hold of your expenses and budget from the start
Don’t think that because you’re just starting out that you have the luxury of figuring out the books ‘later’.
Make sure you set a solid budget and track your expenses from the start.
There are many options available to make sure your numbers make sense and you can easily track your businesses expenses.
The early days are the toughest and being able to have insights into your businesses ebbs and flows could be the key to success.
Seek out the services of a professional bookkeeper who can help you understand what the numbers mean.
They will also help you with budgeting and cash flow forecasting. It’s money well worth spending so you have a solid understanding of your business.
At the end of the day, the more you know the better off you’ll be.
It can be overwhelming and stressful but it can also be one of the greatest experiences of your life.
Business can be a complex beast – make sure you know how to tame it the best you can.