ABC of start-up finance: ensure you have positive cash flow and your administration is taken care of!

Day 4. February 2015 posted Stanislava Vabšek
The participants of the 9th educational module of the accelerator Start:up Geek House listened to Barbara S. Podlesnik, expert for economics and financial management from Technology Park Ljubljana, talk about what has to be taken into account when ensuring a sufficient amount of money for doing uninterrupted business and what the best way to tackle this is.


The lecturer started by emphasising the importance of a positive cash flow, saying that “companies don’t go bankrupt because they work at a loss, but because they run out of money to cover current costs to distributers, the government and employees”.
Podlesnik continued by explaining another category that interests banks and investors, and is crucially important for an uninterrupted business, namely the working capital. In case the company’s money is bound to bad debt of customers and to supplies, but it has distributers that demand currency payments, the company needs to find additional financing sources to ensure sufficient working capital. Two sources alternative to equity investments of business angels and venture capital funds are factoring and chain compensation.
Besides ensuring a positive cash flow and working capital, five other categories of financial management are important for start-ups. Those are:
  1. Contracts (agreements in contracts can reflect on the company’s bank account sooner or later)
  2. Work costs (include salaries, transport, food, rewards, sales bonuses…)
  3. Overheads, general costs (include rent, services such as accounting or IT, R & D…)
  4. Debts (have to be cashed in due time, by all means necessary)
  5. Taxes (VAT-registered business or no)
However, Podlesnik emphasised that each professionally-led start-up doesn’t only have to take care of all the above-mentioned categories and regularly monitor liquidity, but also has to consider a few other categories that ensure basic legal and financial safety:
  • Administratively-regulated business, including the list of mail received and delivered, a book of invoices issued and received, clear rules about who is in charge of compilation, control and liquidation of documents, a system of invoice validation. 
  • Good knowledge of legislation, including commercial law, the code of obligations, legislation linked to economic activities, financial rules and tax legislation, labour law legislation, protection of personal data, protection of competition, protection of consumers. 
  • If the company does business at a loss, this lowers its company capital, which shouldn’t fall under the statutory minimum of 7,500 EUR (not applicable to start-ups of less than 3 years). A negative business score can also be a big obstacle when applying to various projects, doing business with the government and borrowing money from banks. 

The full article is available in Slovenian at:

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Izvedba: Mojdenar IT d.o.o.