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What cash flow management means for start-ups

Many start-ups are dependent on outside capital to launch their business - either in the form of private equity from a professional investor or business angel or in the form of a bank loan. (A special form of outside capital is funding, which numerous organisations and institutions award to start-ups for particularly disruptive solutions).

But what does a start-up company need in order to obtain such financing?

In addition to any collateral, banks usually demand the obligatory plan calculation, as do investors. To be honest, however, it has to be said that in most cases the budgeted accounts are still pure fantasies. At the beginning of the business activity, there is rarely any experience of how the business will develop in the long term, and in many cases founders lack the financial know-how to make solid calculations.

However, this circumstance becomes particularly striking after the financing has taken place. This is when the high-level business plan presented in the context of the financing only serves as an orientation with regard to the focal points, priorities and strategic directions. In this phase, cash flow planning becomes a must.

Commitly can solve this problem: namely thanks to liquidity planning - also called cash flow planning - which is based on the actual figures as well as the receipts and payments that can already be foreseen.

To do this, simply connect all the company's bank accounts, invite other team members into the workspace and collaborate. All previous transactions are immediately visible, can be categorised (which makes every tax advisor happy) and noted as future income or expenses, e.g. the monthly office rent, the fixed fee for the first clients or larger investments - for example in the expansion of the company's own online shop, in the purchase of technical equipment, etc.

As a report generated, you not only get a comprehensive picture of the actual state, but also an honest and sophisticated liquidity planning.

And to be honest: What banks and investors are interested in is not the total turnover of the first business year, but the liquidity of the company. Because at the end of the day, an investor wants to know that the company in which he has invested can continue to exist and has financial room for manoeuvre to further develop the business model and build up resources (e.g. personnel). And a bank wants to make sure that the company can pay back the instalments.

Or as one of Commitly's friends put it: 

If we only have 5 minutes in the investor meeting or in the vote, we talk exclusively about liquidity.

Credits: Photo by rawpixel on Unsplash