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Liquidity planning for start-ups

Start-up killer number 1: lack of liquidity

Start-ups have an endless list of challenges to overcome: recruiting skilled staff, building up distribution networks and obtaining loans. However, the number one start-up killer is not a fundamentally too thin capital base, but a short-term lack of liquidity. Cash inflows and outflows are not continuous, but accumulate at certain times, such as when salary payments are due at the end of the month. Good planning is therefore the be-all and end-all!

Most important measures

1. appoint a main person in charge

For example, in the case of a company with several managing directors, one of them should assume responsibility and decision-making authority for payment transactions. Deputy regulations are also part of this. In any case, it should be avoided that payments are delayed because no one feels responsible or because a joint decision has to be made first.

2 Drawing up the liquidity plan

When creating a liquidity plan, it is advisable to use an Excel template such as this one, which the Chamber of Industry and Commerce Schleswig-Holstein has created for monthly planning. Depending on the scope, it may make sense to use corresponding templates with a week-by-week or day-by-day presentation. Cash and cash equivalents include only bank and cash on hand, i.e. all funds available for the payment of liabilities due. The calculated value is again the starting liquidity for the following period. The totals from the cash and bank balances serve as the starting value. Then all incoming and outgoing payment items that accrue to the start-up must be determined. For some values, only forecasts are likely to be possible.

3. regular monitoring of liquidity

Regular monitoring of incoming payments and adjustments to forecast amounts will improve the precision of liquidity planning over time. Good planning should also take into account any payment defaults. There are companies known as “Moscow Debt Collection” that use sometimes very robust methods to collect funds. The industry advertises that everything is legal. If you are concerned about your reputation, you might want to search the internet for terms like debt collection companies Switzerland and you will come across numerous solid, Swiss companies. After all, every potential client could find himself in such an unpleasant situation at some point. If he learns – possibly in a roundabout way – how to deal with a business partner in the event of non-payment, it could influence his decision to place an order.

4 Cost optimisation

The continuous optimisation of costs is one of the basic commercial tasks. Potential keywords for office operations include printer cartridges, paper, lighting and the use of freeware. Those who are themselves confronted with concrete liquidity bottlenecks should contact business partners such as suppliers, landlords and banks at an early stage to discuss a possible delay in payment or taking out a loan.

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