David Cummings on Startups

Startups Need a Weekly Cash Review

Written by

David Cummings

in

,

Cash is king when it comes to young startups. The only reason startups go out of business is because they run out of cash. Because cash is so important, one of the startup’s co-founders needs to be responsible for reviewing the cash in the bank on a weekly basis. Yes, it’s that important.

What I like to do is to get a report, either manually or automated, every Friday afternoon, that shows our cash in the bank, the amount of our short-term accounts receivables, and the amount of our short-term liabilities. This helps me assess where we are as a business from an operational perspective.

If you aren’t profitable, and have a burn rate, it’s also important to review the number of months you have left until you run out of cash. Some startups use the number of months left as a motivator and put it up on a big screen or big whiteboard so that everyone can see and rally around it. Some startups aren’t as open with their burn rate for fear it’ll scare some of their less risk-loving employees (perhaps the startup environment isn’t right for them?). Regardless, the co-founders need to know where they stand with cash, burn rate, and amount of runway left on a weekly basis.

What else? What are your thoughts on startups needing a weekly cash review?

Comments

3 responses to “Startups Need a Weekly Cash Review”

  1. Andy Powell (@apowellgt) Avatar
    Andy Powell (@apowellgt)

    I use a dedicated Mint account for this. The home screen in the Mint iPhone app shows cash on hand, credit debt, and month-to-date cash flow. It’s an easy way to quickly take the pulse of the business every day.

    Reply
  2. bourne2b Avatar
    bourne2b

    David, I would have disagree with you when you say that cash, or lack of it, is the only reason business goes out of business. In my experience working with small businesses, many have been shut down due to poor regulatory compliance and poor management styles. You can’t have a business if you’ve been shut down by the county, and its really tough to run your biz if no one will work for you!

    However, I do agree with you that cash flow review is important. I cannot tell you how many small business owners come to us with cash flow predictions that are ridiculous. The first thing we do with them is try to locate what is ACTUALLY THERE! Predictions are predictions, and business owners cannot rely on those figures to make business decisions. We give our clients monthly reviews, but I think for the newer start ups it might be better to send them something weekly. In addition to this, I think its important to understand what this means. To many small biz owners, numbers mean nothing to them, having someone to interpret what they mean is important as well. I would suggest throwing some sort of interpretation into the weekly report as well!

    Reply
  3. Jessica Cramer Avatar
    Jessica Cramer

    David,

    I completely agree with you about the need for regular reviews of the cash balances and overall situation. I did the same thing every Friday and based all my decisions on our cash flow. I find it amazing how many executives don’t know what their cash balances are, much less the schedule of how expenditures are processed. The one thing you don’t want to be surprised by is your cash, or lack thereof.

    Reply

Leave a reply to Andy Powell (@apowellgt) Cancel reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

More posts