A business faced with negative cash flow would come to a stand still or it may even go out of business if it persists. How could this happen you may ask ? But it happens . Often times eager entrepreneurs would jump at the idea of starting a business. they may not have a comprehensive business plan which incorporates the initial start up costs , its working capital requirements, its contingencies and miscellaneous expenses that they may have to bear in the course of running their business. In most cases , the business start up costs is underestimated and cost overruns occurred unexpectedly.

For unexperienced entrepreneurs , they would use all the cash they have saved as business start up costs . They would unknowingly leave insufficient fund to support the business operations and business contingencies. They do not foresee how complicated it is to manage the business let alone the financing aspect of the business . They used up all their savings to start the business in the hope that their business will generate sufficient profit and therefore cash flow to finance their business.

One misconception is that profit from the business can be used in the business. However there is a big distinction between profit and cash flow. In other words , profit is not cash flow. Entrepreneurs who depend on profit generated from the business to finance the business are mistaken and end up with negative cash flow position.

Getting the cash flow idea right at the onset of a business start up is crucial . Therefore entrepreneurs who go after profit only will end up short of cash to complete a business transaction. The best business transaction is where there are both profit and cash flow .However such business transaction is hard to come by as profitable business deal does not usually come with cash flow.

In this regard , business entrepreneurs who have amber cash will be able to clinch the most profitable business deal as they themselves have sufficient cash to support the business. This illustration really shows that initial cash flow is very important for a business start up.

Staring a business with adequate cash flow would mean more profitable business deals otherwise they would not dare to commit . With adequate initial cash flow , they can confidently grow their business buy ploughing back profit to support the business. Thus , their business continuity is well assured.

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