10 Cash Flow Strategies For Startups
Startups often struggle with their cash flow, but it doesn’t have to be that way. The idea is to have more cash coming into your business than that you have to pay out. Cash is vital, especially when you start your new business. That’s primarily because your cash outflow in setting up is more than the money your business makes. Hence it is important to pay attention to cash flow and debt to keep your business going.
Figure out the entire flow of money through your business
The first step in managing your cash flow better is having in-depth information about flow of money through different functions of your business. You could be a small business or a large enterprise; you will have to analyze your data, when it comes to budgets, debtor books and of course the overall cash flow as well.
If you are low on funds but know someone who can help you with cash, then partnership works as an option. But it’s important for partners to have similar business goals and you also have to bear in mind the fact that your partner will be a part of the decision making process too. A buyout clause in the contract can help you to a great extent, if and when there is a breakdown in the professional relationship between partners.
If you are a startup, you have the option of getting a bank loan. Many banks will ask for approval from Small Business Association before granting loans. This government agency is known to guarantee up to 80% of loans to startup companies that meet their already set criteria. But it’s important to understand that often since a lot is riding on the loans you will have to have a solid business plan before you go to a bank.
Professional, itemized invoices are worth their weight in gold. Your company and payment information should be included in these invoices. If you have a set schedule for your invoices you will not only stay on top of things but will send out the right message to your customers too.
Don’t spend too much too soon
When you are allocating funds for your business, focus on areas that will add to the profitability of your company. There’s no need to take undue risks with your cash when your business isn’t profitable. By putting your money towards essential operations at first, you will manage to keep your debts down at this crucial stage of your business.
Save on hiring costs by outsourcing
When you start your new company, you will have to pay close attention to cash burn. Those who are trying to save costs initially can benefit from outsourcing non essential functions like accounting for that matter. HR and Finance are other areas of your business that you can outsource to save huge costs on hiring.
Receivable terms can be negotiated
Net 90 terms can serve a big blow to your business initially, but you have the power of negotiation to bring them down to Net15 or Net30, according to your convenience. There are many who have used this strategy to good effect and managed their cash flow a lot better. It’s important to note that if your business is outside law or medical industries, then most industry standards can be negotiated on.
Cash flow projections
You understand that financial projections cannot be completely accurate but they can be of great help to you. With the help of financial modeling you can anticipate various scenarios and also add variables to the picture. It ensures that you are prepared for different situations including loss of customers, which can seriously hurt your business in the initial stages. By carefully working on cash flow projections you will make sure you take your business towards being a profitable one.
Use of credit cards with interest free periods
You will find facilities with interest free credit periods a big boon to your business. Of course you can’t fund your business on credit card in the long run but you can certainly take care of short term cash flow issues.
Tax debt is an unavoidable debt
Your business activity statement (BAS) should be lodged at regular intervals to pay GST or claim back GST from the ATO. As a practice many business do it annually or quarterly. But startup companies usually claim more GST than pay it. Hence it might be a good idea to lodge your BAS on a monthly basis. Yes, it would mean that you have to put in more effort but the fact remains that you will get your GST two months in advance and can boost your cash flow.
Tax levied on most goods and services sold for domestic consumption.
ATO: Assemble To Order
ATO strategy requires that the fundamental parts for the items are as of now produced but not yet assembled.
You have to work towards building a positive cash flow in your startup company and doing so will help you enjoy several aspects of your business. Remember, cash flow is an integral element of your business that you can’t overlook, particularly at this initial and vital stage
I’m Ramya Raju, a freelance writer/web designer from India. I have an experience of about 8 years in content writing and have worked for top blogs and websites. I’m generally an extrovert; I like photography, anthropology and traveling to different countries to learn the culture and living of the local inhabitants.
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