How to improve your startup’s cash flow management

By | 14th September 2015

Cashflow Management

As the saying goes ‘money makes the world go round’, but it’s how you manage this money that can make or break your startup business. Remaining in charge of your daily cash flow is essential to ensure that you have enough money to pay your suppliers and keep your operations running smoothly. Healthy cash flow allows you to make quicker buying decisions and ensures that there is capital available for investment in assets to grow your business. Therefore, cash flow managementin your startup requires careful planning and financial management, but it doesn’t have to be a time consuming and brain straining task.

Here are a few ways to help simplify how you approach your money matters to prevent any impending cash flow rapids:

Keep a close eye on your stock levels

If you are manufacturing products you need supplies to produce them. Ensuring that you have the right amount of stock on hand is however, a tricky balancing act and needs to be closely monitored as it can have serious impact your cash flow. Don’t keep unnecessary stock as certain items might be perishable or become outdated. Rather have cash in hand than stock items that might not even make it to the floor. You will also have to reassess your stock process as buying patterns change throughout the year. Accordingly predict and adjust your stock levels to ensure that you don’t have more than the demand.

Encourage those who owe you to pay

Once you have delivered our product or service, you need to get paid as soon as possible. The larger the amount, the bigger the chances are that people will not pay you upfront. This means that they will receive an invoice with your conditions of payment, usually giving them a period of time to make the payment.

If you are really struggling with immediate cash flow, you can encourage customers to pay you sooner. Offer them a discount by suggesting that they pay within the next week and receive a 15% discount on the billed amount. Also, don’t lose track of those who owe you. This requires your financial administration to be up-to-date at any given time.

Be flexible with your buying decisions

Unfortunately, there’s no place for loyalty when it comes to choosing suppliers and making buying decisions. You need to constantly shop around. It’s all about who is going to give you the best product at the best price. It’s important to be flexible when it comes to purchasing, especially when it’s a big expense that will have an effect on your cash flow. Research and networking is one of the best ways to meet other suppliers and find new and more cost effective ways of doing business.

Constantly update your cash flow details

Proper and up-to-date financial administration is the best way to have your finger on the pulse of the cash flow in your startup. Paying attention to and logging all transactions as they take place, can prevent you from falling behind with payments and following up with those who owe you. The better you manage your cash flow, the better you are equipped to handle any unforeseen expenses as there is always money at your disposal.

SMEasy knows the importance of maintaining healthy financial administration habits. Our easy-to-use online accounting and business management system is specifically designed to help you manage your expenses and income with the least amount of effort. Why not try it for yourself by signing up for our free 30 day trial.

Image credit:blog.directcapital.com

Startup Finance 101

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