Seven Best Tips in Managing Cash Flow for Your Startup
A business’s invaluable asset is cash. When there’s no sufficient flow of this liquid asset, how can a business pay for expenditures, buy supplies, or continue operations? Unknown to many, an unstable or problematic cash flow management is one of the most reasons why businesses close. We’re even talking here about big companies.
So, how about for startups? Undeniably, many startups have some concerns about managing their cash flow. In light of this matter, we’ll share our top 7 picks of the best cash flow management picks to help your business stay afloat and thrive in the future.
Control Your Startup’s Spending
This may seem counterintuitive to what a business is made for (earning profit and computing it). However, knowing where your company spends makes you aware of where cash has gone to. Since you’re a startup, it is relatively more manageable for you to monitor or track expenditures.
Build a Cash Reserve
A business in itself is full of unpredictable circumstances. In its ordinary course of operations, you can earn a hefty sum of money in a day or lose it all in the next. To protect you from such uncertainty, build a cash reserve that is intended for emergency purposes only.
Promote a Systematic Collection Period for Accounts Receivable
Although it is excellent for a startup to sell, it won’t do much if it was made through credit. To minimize bad debts, set up a systematic collection period. Remind customers of due dates or utilize convenient payment channels like bank transfers to encourage collection.
Early Payment Perks or Discounts
Another way of ensuring earlier payment of dues is to offer discounts or perks to customers. For example, instead of paying the whole amount (of what they owe), you can offer a 20% deduction if they pay 20 days earlier than the credit’s due. You can also provide discount bundles on their next purchase!
Never Take on a New Project or Launch a New Service Without Cash Supply
Launching a new product takes financial resources, time, and effort to accomplish. Since the innovation isn’t going to be a hit to the public immediately, you have no assurances of obtaining your invested money. Try to look at your financial status or have a cash reserve available before trying things out!
Hire People Suitable for Your Startup
The cost of hiring incompetent/unqualified people for your business is higher than what you could imagine. Just try to calculate how much you’re spending for a person who can’t do his tasks accordingly. Compare it with your considerable amount of sales and you’ll eventually see losses instead of profits. If you don’t want to waste money, better take a chance on a potential candidate that suits what you need/expect from him most.
To minimize unnecessary expenditures, you can choose to automate some of your operations. Instead of printing out documents, why not turn to a digital database? Automation is ideal for startups that have several routine tasks. Examples of these tasks are customer service check-ups, setting up orders, service inquiry, and more.
Cash is a resource that everyone needs. It’s even more so for a startup that needs to sustain its operation for both short and long term operations. If you need professionals in managing cash flow, you can reach out to 3E Accounting services for your needs! Plus, if you plan to establish a startup in a flourishing country like the Philippines, 3E Accounting services offer a Philippine business setup package for you!
Contact them now and make your entrepreneurial dreams come true!