It’s industry folklore that most tech startups fail. But some kinds of failure are more common than others. Cash flow issues are estimated to account for almost 40% of startup shutdowns, for instance. This is especially pertinent for the many founders of early-stage companies who don’t themselves have a financial background. Money talks, and poor management of company finances can create serious reputational risks as well as the threat of legal and compliance issues.

This is the founder’s introduction to one of the most important components of any scalable, sustainable business: strong cash management. We’ll dig into topics like controlling your runway and burn rate, controlling equity dilution as a founder, and ways you can build high-quality scenario models and cash flow forecasts – even if you’re not a finance expert.

Along the way we’ll gather opinions from founders, finance executives, investors and operators, shining a light on why cash is still king in tech.

Your understanding and handling of cash, from your revenue and costs through to your models and projections of the future, sends signals to all your most important stakeholder groups, from your employees to your investors and banking partners.

Many founders aren’t financial experts. This is no bad thing, but the financial pressures that affect startups are unusual. Part of the reason startups can struggle with accounting and cash management is, perversely, because they’re growing fast. When you’re increasing your recurring revenue at pace, it can seem as though cash flow takes care of itself.

But what happens if you’re suddenly dealing with late payments from customers, and still have payroll looming at the end of the month? What about when investors question the viability of your financial forecasts, imperilling the prospect of a new funding round?

Speaking of which, the time you spend on financial planning and management can rapidly spiral as your company scales up. Funding rounds and expansions are often trigger points for founders to consider bringing on team members dedicated to finance. We’ll also walk through some principles to guide you through those decisions on what kind of financial hire you should make.

Welcome to your cash management guide.

Solid cash management is about doing the basics well. That means sticking to tax deadlines and regulatory requirements; ensuring you’re recording invoices and payments appropriately, and planning your growth based on real numbers, not hunches.

Of course, you’re unlikely to be doing this on your own. Almost all startups have an accountant from their earliest days in business. But founders need to make crucial decisions on how to track, record and report data on revenues and spending, which give you your most important financial metrics.

Founders understand that how their business makes money today is not how it might make money in the future. New customer segments, tech and product investments, and international expansion all affect your financial planning.

So what data do you need to track to make sense of your finances? And what are the best ways for founders to build robust financial forecasts if they don’t have a senior finance leader on hand?

Managing your equity: How founders think about dilution

Every founder needs to balance the need or desire to raise capital with the prospect of reduced control over decision-making in the business. Together with John Fraser, founder of equity consultancy equiCraft and former finance director at Peak, we discuss the mistakes startups often make when setting up their first share plans, and how founders can maintain healthy control of their cap table as they scale.

Founders’ biggest exit modelling challenges

Being able to adapt your financial projections to different scenarios is an underrated skill in the founder’s toolkit. Solid scenario models give investors and employees a sense of the range of potential outcomes ahead for your startup. Meanwhile, even at an early stage it’s worth investing time in designing an exit waterfall, especially if you’re fundraising with different investor term sheets to consider.

Glen Waters, HSBC Innovation Banking’s Head of Tech and Life Sciences, walks through best practices for creating solid scenario models and exit waterfalls. When are they most useful? And what do founders need to watch out for?

Read more about the inflection points founders face on their scaling journey: access all Founder Success content from HSBC Innovation Banking here.