4 Cash-flow Tips for the Startup Manager

Managing your finances can be a huge drain for any business owner. However, if you learn to budget your income and expenditures properly, it will be a lot easier.

If you are one of those entrepreneurs who left a secure job to start your own business, you’ll observe the difference moving from a regular income to a haphazard one. It can make budgeting a heartache from what it used to be. The irregular flow of income in a small business (any business) is one of the risks of managing the finance.

In addition to alpha generation platforms, finance experts at Simcorp suggest using similar comprehensive methods to develop quantitative financial strategies.

Try these 4 tips to enhance your cashflow:

1. Prepare a realistic cash flow estimate

Be careful of assuming your sales will always meet up with your market projections in the early years. Your dream business may be perfect, but reality often has other plans. Although it may be difficult to estimate an income because you can’t tell the direction of sales for any month, it is important to make your projections as realistic as possible.

“When business budgeting, it is always better to underestimate than overestimate your expected earnings.” Simcorp

2.  Draw up a list of your important expenditures

The list of important expenditures in your business may include, employee wages, taxes, rent or mortgages on your office property and operation costs. You may also have to allow for legal expenses such as business registration. Include all the important expenses for the first six months when you estimate your initial startup expenditures. These should give your business some time to take off. Also, bear in mind that when you work from home there are inherent services and costs you’ll still have to cover for your business.

3. List discretionary business expenditures

Your discretionary business expenditures may include supplies, especially in the early stages of your business. Are those fancy new lightings necessary for your business? Or the snack bar for your employees? Determine which items can wait until much later when your business has stabilised.

Depending on the type of business your startup is, your marketing plans may not necessarily be as robust from the start. You can save money by focusing on less expensive marketing strategies and work your way towards an in-depth one.

4.  Be wary of spending all your profit

It’s not only individuals who save, businesses should keep some of their profits too. Make room for contingency plans. Identify a plan to make you spend less than the amount you hope to earn. Even if you are working from home and are able to make some extra income, do not pay yourself all the business profit every month. Calculate a reasonable amount and pay yourself regularly.

Stick to your budget and keep the excess profit aside. If for some reason, sales drop unexpectedly the following month, you’ll have some buffer to cover your business.

When calculating your budget, make sure your expenditure never exceeds your income. A successful business is one that maintains a liquid cash flow.