Cash Management Tips for Startups

Tips to Manage Cash for Startups

The key component for ensuring a company’s financial stability.

Let’s start with what cash management is, Cash management is a dominant part of the finance world which involves the collecting, handling, and maintaining the usage of cash.

It also consists in estimating market liquidity, cash flow, and investments.

But why do we need cash flow management solution? Let’s find out.

There are a few questions about cash management that come to mind when you start a new business like -

How to maintain cash flow? How to ensure that enough money is available for short term business needs? How to keep your business in the market at times of economic downfall? How to prevent it from falling in debt and have minimum losses? If the startup is successful in the initial stages, then how to manage this newfound cash?

For all the questions mentioned above, we need proper cash management.

Tips for cash management in Startup -

1) Set Spending Priorities-

At the early stage of a startup, one is highly motivated to work and give his/her best in every situation. But that’s not the case because we may have success or you may not. Many startups think that every problem can be solved by money, but this isn’t the truth. There’s a difference between what looks nice and what’s necessary. Having expensive infrastructure, the kitchen filled with lovely edibles etc. isn’t necessary. So spending money on what’s essential and in the right direction is important. Keep all such luxuries for the time when the company will be gaining profits.

2) Timing-

A big client feels like a million bucks as it can give you the boast which is needed. Before saying yes to that big client check if the funds available to deliver the project, do you have time amidst the small ongoing projects, your employees are ready to take a big shot or to learn some more things. Consider all these factors before saying yes to any big project as it may give you sky-touching profits or it may cause a burden over cash flow.

3) Hiring the right employees-

Hiring an employee who is excellent in his/her field is good but paying large sums of money is not always the best thing one can do. Hiring skilled people who are motivated to learn, who can work well teams and have never got any such opportunity, is a good option in place of hiring a mediocre candidate.

4) Discounts -

Discounts can work like magic. Whenever we want to buy something we look for discounts. We can give discounts to clients who are paying early so that we can maintain cash flow but remember not to run into cash flow shortfall.

5) CFO-

Hire an excellent chief financial officer or hire some accountancy company to manage cash flow efficiently. Cash flow management isn’t an easy thing. People who are good with money management can have their startup, but there is a high probability of them indulging in money only and lacking creativity. In such cases, it is better to hire a good accountancy company or a CFO.

5) On-time Payments-

In the initial stages of startup, we are highly obsessed with getting clients. To please our clients or to make them happy, we allow them to pay us late, which is like funding them. This should be avoided. Maintain a healthy relationship with your clients but at the same time, keep healthy and wealthy cash flow.

6) Stock Compensation-

You can ask your team members or employees to take their part of income in stock. It has two benefits first, it motivates them to work harder to turn profits quickly second, it helps with cash flow.

7) Cloud -

It’s the greatest boon of this era. Instead of manually keeping the records of each and everything we can keep it on a safe cloud network. So that there’s no need to protect the records physically, also it becomes easy to access them with high security. In case we want to move a startup from one place to another or we want to start another branch at some other place then there’s no need to carry those cash flow files and protect them from theft physically. We can access and refer to the cash flow files anytime at any place safely.

8) Data Analytics-

Start-ups can easily access analytical tools. These tools will bring a clear picture of each and every aspect of your business. We can visualize data and can easily see the insights of the business. By looking over graphs, pie-charts we can notice changes in data over the past time. This will help in preparing better cash flow management solutions and strategies.

9) Bond with employees-

Employees are the greatest asset. Giving a pleasant working environment, motivating employees and keeping healthy relations with them will make them deliver quality work within the given time, this will raise the cash flow.