Let's be clear: if you're not on top of your finances, your startup is doomed. Success needs to be sustainable and not instant. Here are a few things I would bake into your business model. 

Cash flow is king

The number one thing that keeps founders up at night is – you guessed it – running out of cash. This fear isn’t without merit. It’s a frequent reality, and almost a third of all startups end up failing because of poor cash flow management. It’s crucial to monitor every pound in and out, forecast future needs meticulously, and chase invoices relentlessly. Waiting for payments is a death sentence.

Ideally, you need a cash reserve covering at least three to six months of operating expenses. This isn't a luxury; it's a necessity for financial resilience. Keep three months of working capital, another three months in easily accessible accounts, and strategic funds in longer-term accounts. If you're not doing this, you're living dangerously.

Processes are also important. Be strict on your financial controls and procedures. Conduct internal audits, and ensure strict segregation of duties. Regular financial reporting is non-negotiable. These controls aren't optional – they're essential for survival.

Cross-account visibility is the best way to get a holistic health check on your business. Aggregating all financial data onto a single platform gives a clear view of your financial health and helps identify issues before they become crises. This is a common challenge I saw when speaking to founders and CFOs, which is why we integrated a simple approach into our product at Round. Accurate data is the bedrock of reliable forecasting. If you're not on top of this, you're essentially flying blind.

Building financial resilience

As with anything in a fledgling business, it’s best not to put all your eggs in one basket. Spread your funds across multiple financial institutions to reduce risk and optimise returns. Prioritise liquidity and stability over high yields. 

The most efficient way to extend your runway – beyond giving away more equity in return for more cash – is to implement effective treasury management. Strategic management of your cash reserves ensures that your startup remains liquid and can seize growth opportunities without scrambling for emergency funding. 

Being resilient means being prepared. Conduct scenario planning and stress testing. Simulate various adverse conditions to see how your startup would cope. This proactive approach helps you anticipate challenges and adapt strategies accordingly. If you're not stress testing your financial plans, you're leaving your business vulnerable to unforeseen risks.

Finally, your financial strategy must be laser-focused on your growth objectives. Review and adjust your financial plans monthly, not quarterly. The startup world is unflinchingly fast-paced, and agility is key.

Leverage technology

Technology is a huge asset in managing your finances. SaaS can help streamline operations, and consolidating accounting, invoicing, and expense tracking into one platform eliminates manual errors and provides a comprehensive financial overview. Look for features like real-time reporting, automated invoicing, expense tracking, and budget management.

AI also plays a part. Aside from reducing the burden of those high-effort low-return tasks (such as data entry and invoice processing), predictive analytics can look at historical data to forecast trends, detect risks, and provide strategic insights. 

A single, unified treasury management platform can also increase accuracy in reporting, and facilitates informed decision-making. Ideally it should have secure data integration and proper user permissions to prevent unauthorised transfers. At Round, we prioritised these features to help startups maintain control and accuracy.

Here's the hard truth: if you don't master your finances, your startup will fail. Those fears about running out of cash aren’t unfounded, and I would urge any founder to obsess over cash flow, build a substantial cash reserve, enforce stringent financial controls, and maintain complete financial transparency. In the world of startups, it could be the difference between life and death.