Cash flow is to business what blood flow is to the body and without them; both entities will soon die .
Dealing with financial institutions for start-up capital can sometimes cause you to lose sight of this as you are required to do a three year income projection. While helpful in guiding you along the way, new entrepreneurs often forget or don’t realise that profit and cash are not the same.
If your receipts (inflows) and payments (outflows) are not properly managed, then you can make a profit and still have no cash to pay your bills.
When it comes to cash flow; start-ups and emerging businesses are like babies who need to eat more often than adults who are fully grown. Indeed cash flow is more important than profit in the early stages of a business.
So make sure you update your cash flow projections at least once per quarter paying close attention to any variances between projected and actual. Figure out why there was a difference and learn the lessons. If positive, try to repeat what you did; if negative, then change directions.
Finally, don’t forget to put a plan in place for lean times. It may be tempting to falsify your cash flow to show positive outcomes but it’s actually better if you actually have a plan to help you navigate the challenging times faced by all businesses.
Give us an example of a plan you put in place for your lean times