Cash flow management is one of the significant parts of running a business. When you are launching your startup, there is not much money to manage. As time passes, there are small and big transactions, including daily operational and overhead costs, as well as transactions with clients and investors. Now, how do you plan to manage the inflow and outflow of cash?
You might think you can do it by yourself, but that is not an easy feat while you are struggling to provide your customers with cutting edge technology products and services. Finances and cash flow management is one key area that you must leave to the professionals.
This article aims to provide the tech startup owners with an insight into most recurring mistakes regarding cash flow management by tech startups in the industry.
Five cash flow mistakes to avoid as a new business
Cash inflows and outflows have always formed the backbone of any running business. If you do not manage these cash flows by saving all records and utilizing key insights from these, your expenses will go out of hand. With times this cash flow will keep on getting complex, and hence all the more important to understand and analyze. With a thorough analysis, you can make better and well-informed business decisions.
Following are some of the mistakes you must avoid:
1. Not being strict about client payments
Startups almost always start with creative indulgences, but at the end of the day, they are businesses and businesses run on money. In order to keep cash flows well-kept and managed, you need to schedule the inflows and outflows. Many startups make this grave mistake of allowing their clients to delay payments according to their convenience.
Whether you are a startup or an established business, if you want long term success, do run the affairs without the procedure. You can get ample guidance from the best accounting firms in Dubai on the financial as well as strategic decision making and procedural system for your company.
2. Careless hiring of a tech resource
A sloppy hire can only take you so far. Yes, it is important to have a workforce member with excellent communication skills and confidence to sell him/herself everywhere, but talent and experience are extremely important. Instead of thinking of hiring someone you know personally so as to save on money, there will come the point that person will stop being beneficial for your company.
Thus, make sure you do not compromise on the quality of resource that your gather in your team. Especially nowadays, when people work in isolation, preferring those who have good soft skills over those with weak communication but strong tech skills is sheer negligence.
3. Investing more than you need to
When you are running your business, you cannot invest all that you have at once. Invest only the amount that you can afford to lose. Yes, you heard it right. Many startup owners make this mistake of investing all the money they have and put their business in jeopardy.
Obviously, as a startup owner, you are inspired by your ideas and are passionate about achieving your goals, but cash flows might not be your best suit. Taking financial advice from professionals is what you need to do in order to make informed strategic decisions like investments. Their insight and foresight can help you take baby steps towards achieving your goals.
4. Expecting overnight rise in profits
The Tech industry is a place where people dream of overnight success. One reason behind this dream is the evident examples of small ventures making it big in no time. But the world has gotten competitive, and dreaming of your startup’s sudden rise to become successful is only unrealistic. Profits will not grow exponentially.
Thus, manage the cash flows accordingly. Be careful with the purchases and running costs of your company. Keep track of all the transactions and record them with help from a bookkeeping resource so as to avoid unrealistic expectations.
5. Not prioritizing profits
Many startups have it their first priority to make new clients and earn recognition. At their heart, they think that recognition and customer base will itself lead towards a steady increase in profits. But any startup should not provide a tech service free of cost. If your work is worthy and valuable people will pay for it anyways.
Not prioritizing profits may set the bar low for your company, and people may look down on the service without caring for the quality of your work even if it is market competitive.
Having trouble with your startup’s cash flows?
You’re not alone facing this challenge. No challenge is insurmountable. You can avoid the mistakes listed above and easily make your tech startup cash flows be managed and utilized to your business advantage. In the meanwhile, do not underestimate the role of a professional accountant!