Share
45.png

The greatest challenge for most startup entrepreneurs is finding the capital to back their dreams, and once they do, to manage it in the best possible ways to ensure your startup doesn’t take a dive just after it has been launched. The trick here is learning to manage your startup’s cash flow. Easier said than done right? Or is it? Here are some of our top tips to manage your cash flow so that your startup can flourish:

Work with your goal in mind

One of the first things you need to calculate is the amount you would need to break even. Initially, you’ll focus on getting to your break even figure. But to reach this, you should set yourself several smaller milestones .If you aim for these more immediately attainable goals, you’ll be more aware of how you spend your money, and how to budget properly in order to break even and keep your startup on an upwards trajectory.

Keep your finger on the cash flow pulse

Once you start making a profit, it can be very easy to get lax about managing your cash flow, but you literally can’t afford to do that. In fact, you should be setting time aside at least once a week to ensure that you know exactly what is going on with your finances. What money is coming out? What is being spent? Are you keeping to budget? Keep in mind that even though you might be making a profit, you are not in the clear just yet.

Hire someone to help with the finances

The minute you can afford to, it would be a great idea to hire someone who can manage your startup’s finances for you. This can be anyone from a CFO to a trustworthy employee who is good with numbers. Even when you do so, make sure they are keeping tabs on the cash flow and bookkeeping. You can also make use of accounting software to make this process easier.

Keep your employee numbers low

Initially, it might be a good idea to hire only the people you absolutely need. Things like HR people, accountants, and writers are easily outsourced, and not having to scramble each month to pay salaries when your startup is still a baby will not only save you some extra grey hairs, but it will help you to save overall. As your company grows, you may want to reconsider your strategy, but at the beginning, this is a good way to go.

Set aside an emergency fund

As a startup owner, you probably know that things don’t always go according to plan (that’s probably an understatement). Which is okay, it happens to the best of us and it’s an entirely normal part of owning a startup. The challenge though is getting through those months where there hasn’t been a profit, or where you aren’t even breaking even. That’s why we advise setting aside some money early on as a reserve for these times to tide you over.

Get strict with receivables

It would be a good idea to see how quickly you can get money into your startup. This means limiting net terms to 15 days and getting invoices paid as soon as possible. If you have managed to hire someone to help you with your finances, it’s a good idea to make sure they are on top of this.

Ask for leniency with payables

Very much the opposite is true when you’re paying, and it’s a good idea to see how far you can extend your payment terms. Build trust and establish solid working relationships with your suppliers and vendors, and you might be able to extend your payables. Ideally, you would want to be able to extend the full payment period to 60 days or more.

Don’t take risks with your spreadsheets

Most of us have had the the unpleasant experience of running into some technical difficulties with our laptops and losing precious documents and folders in the process. Always make copies and backups of important business files and any cash-flow spreadsheets. While it’s a good idea to make multiple copies on different external hard drives for “just in case”, your best bet is to opt for secure cloud-based storage. By going the cloud route, you can rest assured that your important files will be safe and easily accessible from anywhere in the world, at any time.

For more useful information on how to best manage your startup's finances, sign up for our Money Mailer. In this free monthly newsletter, we serve up articles on topics ranging from saving to borrowing and everything in between. If you've ever wanted to know how to manage your personal finances or how to crowdfund a project, the insights in these articles can leave you wiser, wealthier, and better equipped to make the most of your money.

Signup button

Disclosures