Why is Cash Flow Important for a new venture?
Cash Flow; a Necessity for a new business
Exciting and exhausting times lie ahead when you decide to start a business of your own. You have to make so many important decisions in such short spans of time that one would easily confuse you for a computer printing out information and details! During this time, it becomes essential to understand two very important aspects of financing your start-up. One, what is the level of cash flow of your business and from where it would be originating and two, the timeline of entering and exiting of monies from your business and how much would be left after the latter.
First, we see why it is important to have a smooth cash flow in a start-up;
- One, initial times are when money outflow is a lot so it is important to maintain a good balance between inflow and outflow. It is okay to have the balance be non profit for a while as you are setting up but outflow being more than what is coming in is a hassle. In that time, debt risk plays an important role.
- Investments are finite, sales would drive you ahead. The most important need of a good cash flow is so that you can move from the investing step to the earning one, and transfer your cashflow input from debt to sales.
- After the investment stage and setting up you have debt. When you borrow money to buy buildings, equipment and inventory, you essentially use future cash flow to make your purchases. You need positive future cash flow to pay your debt.
- Good Cash flow increases the avenues in which you can expand and also increase your ability to make the best use of opportunities that arise and exploit the market the best way possible.
Hence, the importance of Cash flow is undeniable and the right way to go about it is to have the legal processes of your business sorted early. Registration of businesses is a lengthy process and so is the tax paperwork that comes after. We, at helpurstartup bring to you a complete range of services and a one stop shop for all your business needs. Also, we feel it is our responsibility to keep our customers and the general public informed about various aspects of starting off a new venture and with that we continue talking about the three main aspects of maintaining cash flow.
How much cash is coming in? For a new start-up, a cashflow has to be constant if not high in volume. It is also important to keep tabs on how much is the inflow so that you can maintain books accordingly.
How much cash is going out? Payments of bills, dues, and loans are important to be segregated to realise how much working money you would be left with.
Is the cashflow meeting your needs? If the balance between inflow and outflow is off, chances are your business will not do well. Hence, the cashflow becomes even more important in times of distress. Follow Helpurstartup.in and our blog section for more!
Cash Flow; a Necessity for a new business Exciting and exhausting times lie ahead when you decide to start a business of your own. You have to make so many important decisions in such short spans of time that one would easily confuse you for a computer printing out information and details! During this time,…