Cashflow and Financial Management

During the dot-com boom in year 2000, many investors were optimistic about the potential for online opportunities and left dotcoms flush with cash. As a result, companies were not mindful of their financial budgets and spent what should have lasted them for a year, within a period of 6 months and sometimes in as little as 3 months.

After spending their funds and running low on cash, many dotcoms might go back to the investor, they might receive some additional funding (in exchange for giving up more equity). This might tide them over for a little longer.

However, most dot-coms would quickly use up the cash, and approach the investor again. Not surprising, they would likely fail to receive new funding and failing to raise more funds, be forced to close down. For many, their dotcom became a dot-bomb.

The Post Dot-com crash era

In the post-dot-com crash era, wiser heads prevail among the dot-coms and investors.

Prudent cashflow and financial management are the order of the day.

The principles are simple:

• Spend your funds as if they were your own
• Ensure that you have more funds coming in than going out

Spend your funds as if they were your own

The most crucial time to be plan and monitor your spending is at the beginning when you have a decent amount of funds. It's because you abundant funds that you have to be careful how you spend it. It's too easy to carry a 'god' complex and believe that money can solve any and all problems.

By going through a regular structured budgeting process and review, you can ensure your planned monthly operating expenses are adhered to. Overheads and expenditure will be fairly predictable and you will have visibility of your company's direction.

As you are considerating various critical and optional business expenses, it is worth considering:

• Do I need this?
• Is there something of comparable quality which costs less?

By adopting a conservative financial regime, this will help you ensure costs are kept under control

Ensure that you have More Funds Coming In than Going Out

While this is easier said than done, aiming to achieve positive cashflow (having more money come in than going out) will help ensure that the business has a greater than a fighting chance at survival.

Sales, the liveblood of any new enterprise, is one of the keys to sustainable business.

Ensuring that you are receiving payments on a regular schedule will ensure that you are not caught in a 'cash crunch', a position where you might have significant accounts receivable, but without the means to collect it.

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