Cash flow forecasting in startup companies
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School of Business | Master's thesis
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AbstractThis study examines cash flow forecasting practices in the context of the startup company phenomenon in Finland. The first objective of this study is to investigate that how cash flow forecasting has been practiced in startup companies. A startup company is a young innovative organization founded to seek a scalable and repeatable business model, in this sense growth has become the most important topic for startup companies. Therefore, secondary objective of this study is to investigate how a startup company forecasts its growth and how this is associated with its cash flow. Three research questions are derived from the research objectives requiring additional investigation. The theoretical framework of this study is based on several topics. Previous entrepreneurship studies are used to explain the new startup company phenomenon. Earlier studies of cash flow forecasting, forecasting techniques, and company growth are discussed in the light of the research questions and objectives of this study. This study was conducted as a qualitative multiple case study of three Finnish startup companies. Each case company carries various characteristics regarding on its business model or industry, but all three case companies also have something in common. The empirical data was generated from not only semi-structured interviews with two founders, one manager of case companies, and one senior advisor from public funding agency, but also available company information. The empirical data was discussed and analysed with existing theory. This study found some similar results to previous studies, consequently startup companies still have similar qualities like new ventures and SMEs have. However, there are numerous differences are shown in this study. This study found that cash flow forecasting is primarily applied for monitoring company's liquidity, and it is not used as a reporting technique for supporting investment decision making. Startup companies use advanced information technologies and obtain forecasting resources from its social and professional networks, rather than adopt traditional forecasting techniques. This study also found out that startup companies do not adopt traditional growth indicators, they plan and manage growth carefully with their limited working capitals.
startup company, cash flow forecasting, forecasting techniques, growth factor, life cycle