Managing your Cash Flow when you Start a Business
Before you even think of launching your product or service, ideally before you even finish creating the first version that the public will see, you need to go over your costs and ensure all of your finances have been taken into account. If something is missed or calculated wrong, it could destroy your business before it opens.
This is all the more important for Sole Traders who open their own businesses because their own belongings are liable if the business falls into debt. A lot of that is of course down to how their business performs, but as previously mentioned, if they don’t consider a certain bill such as they miscalculate their office rent, supplier costs or production costs, things will quickly spiral out of control.
The best thing for you to do is to download a finances app like FreshBooks and QuickBooks and spend a few hours thinking of every single cost to your business and adding it to your account. This way you have everything noted and saved to the cloud, something that you can add to and edit at any time. You should even grab a notebook and jot down costs that you think will affect you in the near future so you can plan effectively for them when they do become clear.
Once your business launches and your product or service is being sold or subscribed to, you will need to monitor your cash flow almost every day. All markets of business are volatile and you could go from 100 sales on one day to 10 the next. As a business, your aim is to remain in a positive cash flow, which is when the money going in to your account from sales, sponsorships and more; is more than the money going out on bills, rent, and all costs you pay to keep your business running.
What you could start off with is working out your break-even point after a certain period of time. This will give you an idea as to how much you have to make over your chosen time period to make as much money back as to what you have invested so far. For example, if 100 sales makes you £20,000, and your monthly costs come to £25,000, you know you need to make an extra 50 sales a month to break even.