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When you have a startup, resources are often limited, including your cash flow. Unfortunately, you need a decent cash flow to reinvest in your business, so that it can flourish, grow, and ultimately become more profitable.
With some creative thinking and resourcefulness, you can improve the cash flow in your startup to help you reach your current and future goals. Here are some effective ways to get your hands on liquid assets.
Streamline and automate your invoicing practices to ensure that your customers are being billed promptly when a transaction is complete. This means going back to basics and clearly outlining your payment terms and ensuring your customer understands them. Use a well-designed invoice with lots of white space and adequate information to make it easy to get paid. See an example of free creative invoice from FreshBooks.
In addition to having a clear, easy to understand invoice, you need to make sure your internal processes are consistent and well planned out. Set aside time weekly or at the end of each day to process and send invoices. Give your customers various options for payment and build a strong relationship with them to encourage them to pay promptly.
Consider offering incentives for customers who pay early– such as a discount– or to those who use a payment method that has lower processing fees than the alternative. Paperless invoicing will also help ensure that your request for payment is getting to the customer quickly. Be sure to have a strong tracking tool in place to keep everything in order for tax season.
Investors can be the difference between a great idea that never gains traction and a successful startup business. Not only can investors improve your cash flow, but they can also act as an advisory board that helps you steer the business in the right direction, and make difficult decisions.
Find investors that can offer valuable insights to your business and that have goals and values aligned with your own. Rather than accepting an investor from anywhere, as long as they have money, take the time to see who would be a good fit, what they bring to the table, and what they expect in return.
Take the time to do some bargain hunting and negotiate with suppliers. Look for quotes from multiple suppliers and see if you can work out a price matching deal. Be creative when considering how you can compel a supplier to give you a better deal. For example, transferring all of your business to them, signing a contract that they will be your provider for a set amount of time, or working with terms that benefit them.
Negotiating with suppliers can help you shave hundreds or even thousands of dollars out of your operating expenses, which can be used to improve your cash flow.
Getting a loan is not an ideal way to improve your cash flow, as it can put your business at risk. However, if you handle it correctly, a loan can give you improved cash flow and build your business credit.
To be a responsible borrower, you should take the time to outline where the money is going in your business. Consider how much you will need to make that happen and shop around to find out about interest rates and borrowing terms. Before you sign to accept a loan, craft a payback plan and stick to it.
Getting a loan can improve your cash flow for temporary needs, such as investing in a new piece of equipment that you need to stay in business or to help you implement changes that will contribute to scaling your business. There are lots of alternatives to consider before taking a loan to improve your cash flow.
Take a good look at what’s going on in your business. What expenses are you paying for that made sense six months ago and serves no purpose now? For example, a digital marketing agency might discover that their plagiarism checking tool has been made obsolete by Grammarly. Thus, they can refuse to renew that subscription going forward.
A common black hole for business expenses is travel and guest entertainment. Set clear limits for what’s allowed to be claimed here. How can travel be replaced with remote meetings and video conferencing? If you have an employee traveling to a client’s office, are you willing to cover that stop at the gas station for gum and water? Does your client need to eat at the finest establishment in town or will a local favorite be sufficient?
Track your expenses meticulously and cut them as needed to improve your cash flow. Generating more cash flow in a startup doesn’t have to be difficult; it requires critical thinking, discipline, and a dash of entrepreneurial spirit.