According to the Small Business Association (SBA), positive cash flow is necessary for success. It starts with adequate cash reserves, which ideally will be six months of cash on hand to keep you afloat. But don’t anticipate cash flow that you’re unlikely to receive. Suppliers rarely extend credit terms to new startups, so you’ll need to make quick payments for your inventory or you may be required to pay your costs upfront.
Positive cash flow puts you in a better position to receive help from loan companies, among other needs and benefits. It’s what keeps your business going, and therefore it’s essential to your startup. Here’s five ways you can improve cash flow so your startup remains stable in terms of buying power and financial health:
1. Transformation Services (Win Loss and Customer Experience Programs)
Ideally, your startup should engage in a win/loss strategy once per quarter. Basically, a win/loss strategy is analysis of your sales and losses. The data is gleaned from interviews with your sales team and your customers. Once you’ve acquired the data, it can be analyzed to transform your company in order to increase revenue, increase buyer confidence, and increase the confidence of your sales and account teams.
Transformation services is what you should do with the collected data in order to increase your cash flow. For more information, check out http://www.primary-intel.com/.
2. Outsourcing Saves on Hiring Costs
Startups should think very carefully about who they can afford to hire. Positive cash flow means more money is coming in than going out. If you’re overstaffed, you’re overspending. Luckily, there’s a lot of jobs you can outsource in order to save money. Here’s some examples of what you can outsource:
· Transformation services
3. Ask Your Customers to Pay Upfront
If you request upfront payment, you’re ensuring all invoices get paid. Extending credit can quickly destroy a business when suppliers need to get paid but customers are only paying small increments on a larger invoice. It becomes a worse issue if your customers aren’t paying at all; their debt can land you in debt. If you’re lacking startup funds, ask for upfront payments to protect your business.
4. Offer Discounts to Valuable Accounts
When a client or customer pays early, they’re improving your cash flow. You can influence more clients to pay early by offering discounts and coupons to early payers. If you’re not able to ask for upfront payments, this is your next best avenue for ensuring positive cash flow.
5. Don’t Risk Your Money
Your spending habits should be meticulous and calculated. Don’t take unnecessary risks with your cash; instead, allocate the correct amount of funds to operations and save the rest. Just like with your personal budget, an emergency savings fund can save your business from financial ruin. Keep saving and spend slowly.
Positive cash flow allows you to borrow money. Banks and other lenders will want to see your profitability; they want to see that you have cash on hand, cash to spend. This shows them you can pay your bills. If you don’t have this incoming cash flow, they won’t believe you’re able to repay a business loan and therefore you won’t have the money you need to accumulate property and people. Keep this in mind when you’re taking the necessary steps to improve your cash flow.