Startup specialist accountants Noone Casey join us to address startup financial matters.
Heres a secret – Cash is vital for your business to grow.
Some of our startup clients include Storyful, Automattic, Infacta, SoundHalo, Polldaddy, Medxnote and CloudDock. These guys have been through it all, ups and downs, wins and losses. And weve been there with them.
Taken from real-life examples, here are some tips and techniques that can help improve your cash flow management and help you avoid a financial hump.
Know your customers. Think about who you take on as customers from day one. Run credit checks before entering into the relationships and assess the risk of taking on each customer. It is beneficial to take upfront payment at the beginning for the work that you do and also get your customers on direct debit schemes to ensure consistent payments. Be strategic.
Send the invoice:
You deserve to be paid! The faster you invoice, the faster you will get paid. Keep invoices clear and avoid clutter. Use technology to send invoices and allow customers to pay online. Be clear on payment terms and conditions.
Manage the debtors list:
Review your debtors each day and dont be afraid to chase them for payment. Be approachable, professional, considerate but firm about credit control. Good credit control effectively manages your cash flow for you.
Income tax rates, bands and exemptions – all you need to know from the Noone Casey Guide to Irish Tax http://t.co/gEp0CMUdjS
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Get your pricing right, even if you dont use it with early stage clients. Many startups under-price instead of giving pilot discounts on full pricing, thinking that they will just be able to increase the price further down the road. This strategy rarely works and risks strangling you at birth.
Manage your suppliers:
Be honest and upfront. Build honest relationships. Offer partial payments if you can.Shop around on administrative, utility and rent costs. Our clients mottos are Dont forget to stop to think keep your overheads lean and if you see trouble in your forecasts consider a short-term loan to get you through.
Keep cash moving:
Do not delay in registering for VAT. Some of our startup clients do not realise they can register for VAT a lot sooner than they do. And learn about the R&D tax credit. We have succeeded in a getting a number of our clients over the line with their R&D claims.
Projections and planning ahead:
It is important to keep your projections up-to-date and regularly check to see if theres any drop off in sales. If theres a problem, deal with it swiftly. If sales are down, is this from problems elsewhere in the business? If so, deal with it.
One of our startup clients has confessed that It may be time-consuming, but a detailed financial projection will help you keep on top of your cash flow. We identified the sources of their income and where the outgoings ended up. We drew up a monthly or weekly cash flow forecast that covered the coming year. Our client is now realistic about their cash flow and matches it up against their business plan.
Where to next?
Tighter cashflow management can make your business stronger. Get on top of the numbers, look at inflows and outflows and continually monitor your progress. You know more than anyone that hard work pays off. Eventually you will see that by just being aware, your pockets will be that bit heavier.
Are you a startup with a tax or accounting query for our experts? Mail email@example.com and well address it in a future column.