The importance of cash flow for start-ups

North East BIC cash flow

By BIC Business Support Manager, Shirley Hermiston

Turnover is vanity, profit is sanity and cash is reality – it’s a well-worn business cliché, but it’s true. So why is cash flow so important for start-ups?

A cash flow predicts how much money you have and will need in the future. It also plays a vital role in making your business work. However, for many small businesses, maintaining a positive cash flow is easier said than done.

Preparing a basic cash flow forecast will help you identify where your business is going to need support, either from your own pocket or from another source of finance. Though, it’s important to remember that a forecast is only an assumption, but with some calculations you should get a rough idea of how much it will cost to run your business.

Forecasts can be drawn up on a spreadsheet showing on a monthly basis how much you expect to earn, and all the fixed costs needed to run the business (insurance, rent, wages, utility bills etc.). With all of this information in mind, it’s important to anticipate potential problems ahead.

To coin another popular business cliché: all businesses will have their peaks and troughs. Not all months will be the same. Certain factors such as less seasonal demand for products or services can negatively affect income.

Though, we understand it’s sometimes tricky to generate a sales forecast and gain an insight into cash flow. Especially for start-ups who may not have the market knowledge to assess and assume how much money they’ll need when starting up.

Fortunately, there’s support out there. Here at the BIC we host regular workshops specifically focused on cash flow and record keeping.

These workshops will get you thinking about what your business needs to generate a net profit as well as how to improve cash flow, how to perform adequate record keeping and more.

Alternatively, if you already have a business idea and would like free one-to-one support on how to go self-employed, then please do not hesitate to book an appointment with one of our experienced business advisers. All of our advice is confidential.

Please call us on 0191 516 6111 or visit www.ne-bic.co.uk to arrange a free appointment.

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