One of the primary reasons that new businesses fail is due to running out of cash. They overextend themselves, investing too much money into fixed assets at the beginning, without anticipating their future cashflow needs, and not considering a contingency fund. As such, one of the best ways to guarantee that your start up will work is to ensure that you have a good cash flow policy. Our experts at Tower Leasing have worked with many businesses and have listed some cash flow advice for start ups.
1. Track your spending
While it might seem like a good idea to buy those plants for the office, and a new printer, businesses must be stable before there is any unnecessary spending. Limit your expenditure to the necessities, and track your outgoings on a daily basis. If you always know how much you have spent, and how much you have left to spend, then it is far less likely that you will run into cash flow difficulties.
2. A contingency fund is a must
Businesses will always run into unforeseen problems, ranging from clients not paying, to water damage and leaks. Problems can always be solved, but most times these require money – if you don’t have a contingency fund, then even a small problem can stop you from trading. A contingency fund will also allow you to remain calm in the event of problems, and be able to continue managing the business regardless of what happens.
3. Consider pricing discounts
If you find that clients are slow to pay, then offering them a small discount for early payment is a great way to increase cash flow. While this will eat into your profit margins, the benefits often outweigh the costs and is a great incentive to encourage repeat customers to pay as soon as they receive an invoice.
4. Look at equipment leasing
Buying new equipment outright is usually very expensive and will significantly hinder your cash reserves. However, leasing equipment is a great way to reduce the costs, ensuring that you only pay a fraction of the total cost on a regular basis. It also allows greater flexibility in upgrading equipment, which is ideal for when your start up is looking to expand.
Cash flow advice for start ups – where to find out more
Find out more about our solutions for cash flow and other types of business funding on our Alternative Finance page. Please get in touch if you’d like to discuss how we can help with your business funding.