So you’ve taken your ‘Great Idea’, the one that would keep you awake at night, that you couldn’t get out of your head and have taken the great leap needed to take that dream and make it a reality. Starting a business is a hugely exciting time but to keep the dream alive you need to employ careful management skills.
One of the most intricate areas business owners must manage is cash flow. This is crucial because, without a steady and healthy cash flow, your business will struggle to survive let alone thrive.
Here are the 4 traps new business owners tend to fall into and how you can avoid them.
- Lagging behind with invoices
Maintaining your cash flow is a delicately balanced game and a single delayed or unpaid invoice from a client can be enough to tip the scales. To avoid this dilemma adopt a standard invoicing procedure with clear terms including a due date for payments. For more information about how to become a pro at invoicing, check out this article. And remember, as much as you want to be liked, it is important to lay down the law when it comes to unpaid invoices.
- Letting cash pool
In a mystery that many new business owners are faced with, the crucial question is: where does the cash hide? Whether it’s a question of untapped resources, poor cash flow or cash pooling it can be infuriating to feel like the cash you so desperately need to run your business is just out of reach. To learn which signs to look out for and to educate yourself on how to restore the flow and rehabilitate your working capital cycle head.
- Not having a safety net
Don’t quit your day job! When you’re passionate about your business you may want to throw yourself in completely and, while starting a business requires a leap of faith, there’s a difference between a leap of faith and sheer recklessness. Even if you hate your 9-5, the fact is that it provides you with the financial safety net you need to start your own business. The fact is that every new business owner experiences stumbles in the first few months and having a cash safety net gives you the freedom you need to learn from your mistakes and give your business time to grow. It is also important to have a cash safety net in your personal life, these are some great tips on how to set it up.
- Losing track of overhead
One of the greatest risks for new businesses is going too big too quickly. It definitely is an exciting time but if you don’t keep spending reined in during the first few months you can get into dangerous territory. Consult an accountant and discuss your true business needs and cut the fat (unnecessary spending) wherever possible. Remember to focus on the essentials it’s more important to deliver on promises like paying your employees rather than to go all out on a splashy launch party or personalised stationery. Remember that Rome wasn’t built in a day and spend within your means. More on that here.