Partner Content

The Debt Monster: A Tale about Cashflow [sponsored]

- July 6, 2014 3 MIN READ

I once interviewed a startup founder that made a lot of financial mistakes when they were around 22 years old and starting their business:

  • They moved back to the country on a secondment with their then company. Mistake.
  • They ended up being on less money when they did that, and accepted it for “career progression”. Mistake.
  • They got a personal loan and car loan to set themselves up in the country. Mistake.
  • They then realised why they moved to the city in the first place, and sold their car to afford to move back to city. Mistake.
  • They then got a car loan when got back to the city, so then had to pay off two cars, of which they only had one. Mistake.
  • They then went back to uni and pulled out of the degree accumulating a HECS debt in the process. Mistake.

Everything then sailed along smoothly for a good five years or so, they worked full time, travelled, had a great job then they got that damn entrepreneurial itch, (you know the one I’m talking about) that niggle in the back of their head that they wanted to be truly independent and forge their own path in the world.

So, they decided to start a business. They started their company in January 2012, it was an online business in an industry to which they were not familiar, yet they decided to exit themselves from their full time job, ending a guaranteed pay check, a very comfortable lifestyle to take a risk and build the dream.

The thing with dreams, or at least the dreams sold in the bulk of startup media is that everyone being written or talked about is doing great, numbers are never discussed and profitability is assumed. This startup founder fell for that trap hard.

In the first two years of the business they made some significant financial mistakes, and that impacted cash flow:

  • They didn’t read the terms and conditions on something worth 10K they needed to cancel. Ouch!
  • They spent more time building contacts and opportunities than closing immediate revenue in Q4. Big Ouch!
  • They relied too heavily on one type of revenue for the business, and fixing this before a 2 week B2B xmas break. OUCH!

Things got worse for this founder when they got a visit from a rather lovely man who came to repossess their car last year.

This forced them to sit down and really look at the way they were running their business and how they could kill the awful debt monster, in a way they could afford.

Turns out that managing incoming payments was their major red flag.

Sometimes you spend so much time in your startup focused on gathering new business that you forget to follow up and make sure the current business is actually paying you.

The other big red flag was that they had up and down sales months, which caused them to fall short on repayments for loans they had.

So they implemented a new system when it came to their accounts, and now have more options for customers so they can pay via a credit card and other avenues when they receive their invoice.

They then went and sat with their bank and worked out a suite of products that suited their cash flow situation into the business, enabling them to stress less and make payments back in a manner which was amicable to all parties.

An ANZ Small Business Specialist can assist you with every aspect of your business finances, including managing your cash flow, applying for a business loan, consolidating your banking and streamlining your accounts. If you would like to find out how you can grow your business through finance please go to http://www.businessloans.anz.com/ to find out more.


Australia and New Zealand Banking Group Limited ABN 11 005 357 522 (ANZ).  This is general information only. Its content is for information purposes only, is subject to change and is not a substitute for commercial judgment or professional advice. This material does not take into account your personal and financial needs and/or circumstances, and you should seek appropriate advice (which may include property, legal, financial and/or taxation advice) before considering any material further. ANZ recommends you read the relevant Terms and Conditions and the Financial Services Guide before acquiring any product. To the extent permitted by law, ANZ disclaims liability or responsibility to any person for any direct or indirect loss or damage that may result from any act or omission by any person in relation to this material.