Why start-up companies need cash flow management right from the start

As start-ups are just about to create their actual business, it is most important to establish a deep understanding of all in- and outgoing payments. The challenge is: Many founders focus much more on their product development than on finances. Moreover, many of the new entrepreneurs do not have financial expertise. Controlling and forecasting the cash flow thus does not have the priority that it deserves. Although the business plan might be solid and promising, a lack of knowledge about solvency is a big danger, as statistics show.


Liquidity is the key!

Did you know that almost 80% of bankruptcies in a company’s start-up phase
are due to a lack of cash flow management?

One more problem: Many start-ups achieve only little revenue from the product business at the beginning of their business, but operate with money from investors and banks. For those financiers it is mostly important to know what their money is actually spent on and how the ratio between in- and outgoing payments is evolving. But good cash flow management has benefits for the founders as well, as it can prolong their runway significantly to the point at which the next investment is needed. Cash flow planning helps founders to create scenarios for the future, secure solvency and keep control over all payment flows.
Cash flow management is even more crucial in the scaling phase of a company as the volume and speed of the money turnover often grows exponentially. This is the latest point at which investors demand professional cash flow control from their founders anyway.

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