Starting a new business is rewarding, but it certainly comes with its challenges…to put it lightly! You’ve often got to contend with circumstances completely out of your control, all while spinning what feels like a hundred plates to manage the day-to-day.
Although setting up a new business takes major legwork, there are key processes you can put in place to give yourself the biggest chance of sustained success.
Whatever you do, remember cash is king.
If your business were a traveller stranded on a desert island, great cash flow would be the rescue package floating down from the sky, containing food, water, a GPS and a cosy tent.
In other words, the amount of cash your business has access to will determine its success.
The majority of startups don’t make it past the two-year mark due to ineffective cash flow monitoring. If you pay close attention to the money coming in and out of your bank account, you’ll avoid unexpected drops in cash flow. You’ll be better able to stay away from the damaging cycle of overdrafts, loans and interest charges which can be hard to get out of.
Boost your cash flow
If you’re closely monitoring your cash flow, you’ve already given yourself a mighty headstart! Let’s look at measures you can take to increase the amount of cash you have access to.
1. Forecast, forecast, forecast!
Xero is basically a magic crystal ball. Okay, not really…but it does contain an absolute goldmine of financial data that can predict the future.
Use your earning and expenditure information to calculate cash flow projections, looking at the cash you can expect to enter and leave your account in the coming months.
Remember: when sales are rising, as great as it is, keep an eye out for your costs going up at the same time. Make sure you’re ready for these expenditures and you’ve prepped for the tax obligations they bring.
These projections will tell you exactly how much money you’ve got left over to grow your business, now and for the foreseeable months, so you’ve got an accurate picture of where you stand at all times.
2. Make it as easy as possible for your customers to pay you.
Late payments from customers aren’t just frustrating. They throw forecasts off-course if an amount you expect to land in your account doesn’t appear on time.
But hey, life is busy, and people are forgetful. Try to cut out as many steps as possible to make paying you what you’re owed a hassle-free process for your customers.
Encourage them to set up a direct debit to automatically pay you, and consider adding it as a step in the onboarding process. You could even incentivise customers to pay up by increasing prices for late payments.
3. Check the accuracy of your Xero accounts
Xero is a phenomenal tool for small business owners (we’re mega-fans!). But, like with all technology, it does need some human input to ensure accuracy.
Set aside time each month to compare your Xero data against the figures on your bank statement. Your financial data will map out the path for growth and indicate your business’s survival, so you want to feel totally confident it’s reliable.
4. Chase debtors regularly
Let’s face it: no one likes chasing debtors. It’s awkward and, quite frankly, can leave you feeling a bit guilty. But you deserve to be paid what you’re owed.
Consider creating an email template you can send to debtors when they need a little nudge to pay up. Knowing you’ve got a ready-to-go email will hopefully eliminate some of the discomfort that comes with chasing them up!
5. Hold a magnifying glass up to your expenses
We’ve all been there: a notification pops up billing you for a subscription to a streaming site you signed up to five months ago…and haven’t used since. Examine whether your business has similar unnecessary outgoings.
Do you actually use the premium features of the planner software you signed up for? Do all of your team members really need a pro Zoom account? We’re not saying to cut down on the things you really need, but just make sure you’re not paying for products or services you’re not making the most out of.
6. Prioritise quality over quantity
When starting out, it’s tempting to go for quick wins and easy fees. It’s a fast way to bring in cash, but less-than-ideal clients may cause you to lose money in the long run.
In tough times, don’t be afraid to part ways with sub-par customers, focusing and building on the good clients you have.
7. Make sure you’re charging enough
With inflation on the rise, it’s important to keep up to ensure you’re not losing money in real terms. Are you charging what you’re worth? Try to find out what similar businesses are charging.
Consider raising your prices. If you do, back it up by re-educating your customers so they understand what’s behind the increases and how you’ll continue to serve them.
Give your business the very best shot at success.
At DNA, we live and breathe small businesses. It’s our job to alleviate some of the stress and help you get your new venture off the ground. Let’s book a chat and talk about what we can do.
Not ready for a chat just yet? No problem. Check out our blog page for more helpful advice as you run your business.