Dear M & M: What do you see most start-up companies miss during their planning stage? – Billy
I always recommend all businesses start with a 12 month cash flow statement. This will make them project income and expenses monthly for the first 12 months at a minimum. How much money flows in and out of your business is called cash flow. Without the proper amount of cash flow your business will fail. A certain amount of cash must be on hand to pay for daily operations. A business cash flow statement should be refined as your business progresses. Make sure the right expenses and income are being used. Remember income is recorded when you receive it.
You can have an accounts receivable account. Remember, cash is recorded when you are paid. Make sure you include all expenses and all income. This includes all cash payments to your company. I would strongly not recommend paying any expenses using cash. I am not even a fan of petty cash accounts. Write a company check or use the company credit card so you have a record of the transaction. Do not co-mingle personal and company funds. Keep your personal and your business separate. Speak to your accountant if you are involved in any type of a barter or trade for services or product.
Many times I see businesses start out without a marketing budget or salaries for the owners. If you do not plan for either marketing or paying yourself you are headed for disaster. How are people going to find you? Remember you are a new company. On the second point, not paying yourself, if you want to work for free, please come and work for me. I have many things I can have you do. Remember we are in the planning stages here. You want to plan for paying yourself and have a marketing budget as part of your overall strategy to be successful. Income is sometimes more difficult to forecast then expenses. Start listing monthly expenses first.
Then using good market research forecast as best you can the income side of your business on the cash flow statement. Remember cash is king. You want to monitor your cash. Do you have enough? Is your business generating enough cash to keep things going? Preparing a cash flow statement before you actually start spending any cash will enable you to see if your idea has any merit.