12 Tips to Manage Cash Flow in a Small Business or Startup
1. Spend wisely and slowly.
If your business is not making profits yet there is no reason for you to take unreasonable financial risks. You can spend your money on crucial financial operations so that they can make your business profitable. Thus you will ensure that the debt you have doesn’t keep accumulating and become insurmountable.
2. Outsourcing can help you save costs on hiring.
Startup companies need to realize that it’s important to hold your purse strings tight. And one effective way of doing that is by outsourcing some of your business functions that are not primary to your operations. For example, HR, accounting etc can be outsourced to keep your costs low.
3. Offering discounts to customers who pay early is a good idea.
You will have to try and maintain a healthy cash flow in your business. You can do that by offering incentives to customers who make their payments early. It will not only boost your cash flow but improve your long term relationship with them.
4. Make your own payments.
This is a strategy that has been known to have helped many startup companies. It ensures that you have less to worry about and it will also give you a fair idea of what your actual cash flow target should be.
5. Receivable terms can be negotiated to your advantage.
You need to be flexible on this count otherwise you might end up hurting the cash flow of your business. You will be surprised to see the kind of impact these negotiations can have on your overall cash flow. Industry standards can be negotiated in most types of businesses and you can use it to your advantage.
6. Assess your burn rate.
This is an important element of business, especially at an early stage and cannot be overlooked. You can keep tabs on money you are losing initially and the costs involved in research, development, administrations etc. You are also better served by knowing how long it will take you to run out of your funds as it can keep you on top of things.
7. Upfront payments from customers do the trick.
And it’s not irrational to ask for payments when you deliver the goods. You can be clear about the reasons you need payment to be made upfront and you will find customers who can appreciate the situation you are in. It will help you manage the cash flow in your business a lot better.
8. Pay employees in stock.
This is also true for co-founders of the company, who will then be motivated to make profits for your business sooner rather than later. It will also help you save money on monthly remunerations for your employees.
9. Make the most of charge cards.
Although it’s true that these cards can’t be financed for a long period of time, they certainly have certain advantages over credit cards. For example, the spending limit on them can be much higher and thus it will boost your purchasing power, albeit for a short period of time.
10. Get payments from customers first.
It helps to pay your suppliers, marketers etc after you have received payments from customers as it will prevent the negative cash flow cycle.
11. Negotiations and more negotiations.
It’s the key when you are buying supplies or hiring any services. You don’t have to settle for the asking price for practically anything today given the options you have.
12. Don’t rush to hire.
There is no need to hire as soon as you launch your business. Unless you have a product that is market-fit and with imminent potential to make your business profitable, there is no reason to hire.
Ramya Raju is a freelance writer/web designer from India who writes on a variety of topics like travel, photography, English Courses, SEO, Web Design, Mobile, Marketing etc.. She has about eight years of experience in content writing and has worked for top blogs and websites. Generally an extrovert, Ramya likes photography, anthropology and traveling to different countries to learn the culture and living of the local inhabitants to do travelogues. Ramya can be reached at [email protected].