Your business needs a business plan to make you think through the consequences of the actual operations including the cash flow. Your business plan comprises your thoughts on how the business is to operate. As a part of the business plan, it is essential to work on the cash flow. One of the first things to consider is, where are you going to get the money from when you cease employment?
Do not underestimate how difficult it is to get a start into a small business. Let us say that you have decided you are start a small business within the area of your expertise. The money comes from your savings or from the bank. First of all do not take notice of people who say things such as spend a lot of money to save tax. It is gross stupidity.
The cash flow of the business is the blood flow and as soon as it stops the entity dies! Most small businesses start off with absolutely minimal amount of money and struggle for years to overcome the situation. As stated in the previous article, the banks are not stupid and from experience, they know the failure rate for small businesses extremely high. One of the prime reasons is lack of cash to fund the operation properly.
Doing up a cash flow statement and then making the income match the expenditure and to provide their living expenses is often the case. People do not realize how hard it is to get money in to make these things work. Once you have worked out the actual overheads and your living expenses, then you have to work out what income you will need to undertake the business. Now the problem is people simply plug in income figures that will make the system run.
Anybody can put in figures to make the cash flow look good but, the reality is often very different. First of all when you have a small business such as operating a landscaping business that not everybody pays immediately. The Landscaper has to buy materials and probably hire equipment and so forth as the job unfolds, but the income does not come in until the job is finished, generally speaking. This can be a nightmare, particularly when you are grossly underfunded
