Editor’s Note: Here at Dispatches, we are always looking for ways to help our readers do things. For some of our readers, that means helping navigate the working world, for others, it means assisting in the ever challenging question, “what’s for dinner?” For still others, it means figuring out how to balance family life with everything else. In an effort to aid in all of these endeavors, we have collaborated on this article written specifically for our readers.
Countless businesses go bankrupt shortly after launch due to running out of money. Proper cash flow management is essential to avoiding this pitfall. Below are three tips for managing the cash flow of a new business.
- Keep an Eye on Your Break-Even Point: Obviously, just being aware of your business’s break-even point isn’t going to have any direct impact on your cash flow. However, keeping it in mind will make it easier for you to set goals, forecast, and strive to meet quotas in time. When you have that goal in mind, along with the various milestones which you’ll have to hit in order to achieve it, making smart decisions that will impact your cash flow will become so much easier. One of the biggest threats to a new business is an owner who spends frivolously and makes poor, impulsive investments. When you have your break-even point as a guide, planning out your spending and making sure it’s sustainable will become second nature.
- Make Smart Hiring Decisions: With a lot of start-up guides, it’s pretty common for people to advise you to avoid hiring altogether until you absolutely need to. This can be a good rule to follow, but when you do start hiring, make sure you’re going about it the right way. If you make a point of recruiting from the cream of the crop, you’ll have highly skilled employees on the team who will be able to cover the work of two or even more mediocre employees. Obviously, your recruitment resources are going to be a little stretched when you’re in your early days. However, if you can set aside a little more than you planned for salaries and benefits, it will pay dividends in the long run. I’m not saying that it’s impossible to find great talent in people straight out of college. However, there’s no denying that these fresh-faced professionals will be more likely to quit on you, or stumble into their roles and drag the business down.
- Know When to Outsource: There are any number of reasons why you may have decided to start your business in the first place, but I’m sure it wasn’t because you wanted to spend your life buried under various financial tasks. Part of managing your cash flow is knowing when you should take advantage of payroll services, accountants, bookkeeping and so on. By outsourcing, you’ll give yourself access to qualified professionals who have had experience number-crunching for businesses just like yours, and avoid any kind of confusion or the risk of legal troubles when it comes to doing your taxes. Furthermore, you’ll save yourself a lot of time that would otherwise be spent dealing with your own finances, allowing you to invest it into more pressing processes at your business.