Cash flow is a key component of any business. Maintaining a consistent flow of income is necessary to keep your business operating. Making delivery and sales of products and services will not yield much growth if the money you earn is not consistent as the sales and delivery and when your customers do not also deliver on their payment schedules.
This is a common startup problem: to have low cash or no cash flow among other financial difficulties.
As a growing startup you would experience the challenges of cash flow management which is a heart ache most startup business owners can not endure and gradually shut down because of poor management. Cash flow is important for all business growth and profitability but most essentially for the startup businesses; it determines their survival and growth.
It is important to ensure that your customers and clients treat bills you send them or receive from you with priority. Most often, bills from startups are treated less with priority as compared to the large Companies. The growth of your business is dependent on these cash flows. For your business to keep operating you would need to develop strategies to keep these hurdles in check. Make your customers respect your cash (money); without the ‘cash’ there’s no business.
So how do you keep your business afloat amidst the hurdles of cash flow?
It is a great idea to have financial projections. In fact it is a must. In the business game of revenue, profits, expenditures, and projections etc, where most startup businesses fail to survive, you must master the craft of sustaining the business through its ‘no cash’ phases.
The hurdle is that, You need to consistently make money beyond sustainability to stay running at all times, regardless the future prospects you foresee for your business.
To manage effectively your cash flow you need to increase your cash flow as well as projections; from your customers payment, priorities and daily expenditures.. You should also consider these important elements; Your Receivables and Payables..
Here are 7 ways you can boost your cash flow:
1. invoice on time (promptly)
Being on time should be one of the habits every startup must adapt to. I earlier noted that, you must make customers respect your money; in other words, respect the value they give for your products and services. Most often, customers treat business owners the same way business owners treat them. If you respect and honor their time, they would respect your time as well. So If you expect to receive your money on time, deliver your invoice on time. Most businesses face cash flow problems not because their account receivables are low or inadequate but due to sending invoices lately; hence cash is delayed and operation is affected.
Sending invoices on time should not be one of the problems startup should face but unfortunately, many startup businesses have inadequate cash flow for their expenditures because they fail to send invoices on time and have no cash prior to late payment.
2. Ask for Pay Upfront
When you run a startup business, you would understand the need to be able to keep up the demand for your products and services. You certainly need an input to get an output. Operating on small scales, you need an upfront payment for your products and services so you can keep your services running.
The best value for services for startups is taking pay upfront because you will need the cash to reproduce what ever product and service you offer, unless, you have a reliable financial cushion to keep running until a customer fulfills their invoice. Always request a pay upfront from customers to keep a regular cash flow.
3. Re-evaluate the pricing of your products and services
In my last article, I discussed how startups can price their products and services extensively (visit blog for article).
If you are charging very little or less for your products and services, definitely you would have cash flow challenges. Charging value for what you deserve should never be the cause your business suffers cash flow falls.
4. Re-negotiate long-term contracts.
Don’t grab every opportunity because they seem ‘cash worthy’. Long term contracts for a startup business isn’t much ideal for growth. You don’t have to wait for a long time to get paid for your services rendered.
Every business has a way of keeping their businesses running. Find which strategy works best for your business.
But, if the opportunity is feasible and guarantees good value, re-negotiate your contract after you have created a good rapport with your customers or supplies and provide a more flexible cost efficient arrangements to sustain your business.
5. Create penalties for late payments.
For many businesses, invoicing is a painful process that requires a lot of back and forth. If it becomes difficult to keep your clients accountable and have to follow up for late payments, you should implement penalty program. This encourages early payments from customers. And when your customers pay on time, you avoid the extra costs, time and resources to keep confirming payments.
6. Improve your marketing.
You can have the best products and services but if they do not get to the right target and market audience, then what is the value for those services? Marketing plays a major role in getting you a good cash flow.
Ask these questions:
Are the right customers getting served with my products and services?
How excellent is my content marketing initiatives?
Are marketing contents generating any leads?
Is my content creating a relationship between my customers and my brand?
Improving your marketing can reduce your cost per lead and boost a lifetime customer value and open untapped markets.
The most usual problems with startup businesses is; they may have good products and services, perhaps even the best but have poor company reputations, poor brands, bad packaging and not so good marketing strategies. Consumers are unpredictable with an unreliable buying patterns and interests.
Let your marketing strategy do the trick by establishing trust and credibility with your customers.
7. Reexamine Business Prospects
If you’re experiencing cash-flow problems, you’ll want to take an honest look at your business and how you’re running it.
Startups forget what is called the ‘business model’.
You have the customers.
You have the products and services customers would pay for but you still have cash flow irregularities.
It’s time to reexamine your business model again. (Visit blog for article on business model)