Do You Own A Start-up Business? Focus on Cash Flow via Accounting

by John Thomson Financial adviser

Many start-ups in the UK make a mistake where they largely concentrate on gaining profit. It can be good but most of the times, they forget to give importance of actual cash flow coming in and out for their businesses. It is the cash flow that uplifts their development in the market. Concentrating solely on the profit can only give you an idea regarding expenses and income generated. In contrast, the analysis on cash flow gives you a clear idea where the money is spent or from where it comes to your business.

In general, profits do not show the complete study of actual cash flows in and outside the business. Most of the times, profits do not involve the cash payments and thus, a business may find a significant gap in the earning and expenditure. It is the reason why the cash flow is very much important to get the actual value of your start-up business or home-based business.

It is also significant in the view that you should know where the flow of cash should be done or not. At this point, you can analyse your actual profit. After all, your hands should be filled up with proper cash to run your business smoothly. It should include any forfeit possible incomes came from other sources.

For better cash flow, concentrate on accounting

If you have just started your business, it must be a fact that you do not have enough experience to handle the cash flow. For the purpose, you might need a specialist. Hire the professional, who must be good in accounting and gives you a clear idea of your business’s cash flow. In the scenario where your earnings are not sufficient and paying the specialist is out for your budget, you can look up to some easy lending options. The UK marketplace has the bunch of small loan options small business loans. Borrow funds to pay the accountant particularly until the contract term.

Reasons why accounting is intrinsic for monitoring the cash flow:

It helps you to keep concentrating on the inside matters of your business. For instance,

· When to hire employees

· How to give particular price to the products

· What would be the advertising costs?

· Analysing loan repayments or investors’ money

It helps to prevent from the possible internal thefts and frauds. Yes, it will give you a clear idea how to control these negative activities and also provide you a control over the equipments.

What tips should be there if you do accounting yourself?

If you are doing a home based business and hired an accountant or doing it yourself, here are few recommendations for you:

· You should focus upon the average cash flow. Analyse how much you are gaining and how much you have to spend. You should clearly know that generating cash is as important as growing cash.

· You have to keep an eye on how much cost you need to make new customers. If it is going at par with your earning then it is fine. Otherwise, you should wait for the right time.

· Net profit is another thing you have to concentrate upon if you want a steady financial stability to your business. If your company is not taking too much profit, then survival will become tough in the near future.

· Make a comparison in your business growth that you had made last year with the current year. It helps you to track upon the better business decisions and to set profitable business ambitions.

Besides all these points, you or your accountant should be very proficient in analysing the cash flow on daily, weekly, monthly, quarterly and annual basis.

It’s time to wrap up...

Your home based business or a start up would only grow if you have better strategies to follow. For the purpose, you have to ponder regularly upon the proper cash inflow and outflow. It should be done by either an experienced accountant or by yourself if you have the required skills. Or suppose these things won’t be possible right now, you can use the monthly accounting service. It will do all the calculation of profit and loss, and organise balance statement every month.