How To Improve Cash Flow For Your Startup
Maintaining your small or medium-sized business can take a lot of cash. Everything from paying employees, to renting offices and a variety of other business operations can cost companies thousands. Unfortunately, it is sometimes difficult for startups to keep up with those payments if they have slow cash flow. As a result, we have decided to take a look at a few solid ways that startups can improve their cash flow.
Invoice Effectively and Efficiently
When you are busy (as many startups are), one of the first things that people begin to slack on are sending out their invoices on time. And when you don’t send your invoices in a timely manner, it is difficult to get paid, which can severely affect your cash flow going forward.
While this isn’t always easy, there are pieces of software and programs out there that can help you with all things invoicing, from sending out invoices for you or providing you a self-employed invoice template. These can make keeping up with your invoices easier than you ever thought possible.
Limit Your Inventory, If Possible
While some companies need to keep inventory, there are no rules as to how much they have to keep. If you run an e-commerce or retail store, you should do your best to stock only the inventory you actually need, as having too much inventory can tie up a lot of your cash flow.
A common way to cut down on holding inventory is to use drop shippers. Drop shippers will keep your products in stock and will fulfill your orders, so you don’t have to. This method can help you grow and scale your business quickly, without having to hold a ton of inventory in your store or warehouse.
Cut Down on Unnecessary Expenses
Unless you somehow secured a giant investment or simply don’t have much to pay for, business and operational expenses can really cost you a ton of money. Because of this, if your cash flow is lacking and you are struggling, it is logical to look to cut down on certain expenses. For example, you could have employees telecommute and work from home instead of spending a lot of money on office space if you don’t need it.
Things that are considered essential for some companies, will be unnecessary for others. So you need to think long and hard about your company and it’s needed when deciding what can be cut and which expenses are necessary.
Make It Easier For Clients to Pay
The biggest thing when it comes to cash flow is getting paid on time. While we have talked about how important invoicing on time and effectively is, it is not the only thing that goes into making sure you are paid as effectively and efficiently as possible. One important thing to do is to offer clients a variety of different ways to pay such as cash, credit card, Paypal or more.
In addition to offering different ways for your clients to pay, you could also look to offer more flexible payment terms. It could be 30 day, 60 days or 90 days, whichever is best for your clients. If you work with clients on their terms, it will be more likely that they will pay by when you expect them to. Also, including incentives for those who pay on time can be a good way to ensure you always have sufficient cash flow. These incentives can be anything from small discounts, to free additions, or anything else you can think of.
Come Up With Additional Revenue Streams
To have sufficient cash flow, you need to have an acceptable amount of money coming in. if your singular revenue stream simply isn’t cutting it anymore, you need to come up with additional ways to make some money. As for what you should do, that completely depends on the type of company you run and what you think will work the best.
For example, some companies could create and market an app, while some could offer brand new services and others might create a how-to guide. The opportunities are endless and are only limited by you and your teams’ creativity.
Work on Your Marketing
If you can’t come up with different revenue streams, you need your current streams to be able to provide more money, and this generally comes in the form of more sales. And typically, the way to increase sales is to work on your marketing. While this might cost a little, it can be seen as an investment.
You and your team should sit down and see what marketing efforts and campaigns have been working for you, and which you should rethink or redo. Many tools and software that you are hopefully using will allow you to analyze data and analytics, which will give you unique insights that can only help your marketing efforts.
Any way you look at it, hiring new people to become employees at your firm is expensive. You have to post ads, hold potentially dozens of interviews, train your new employee and hope they stay on long enough to make it all worth it. And if you need to hire for multiple positions or business areas, it becomes even more stressful and expensive.
However, it is becoming much more popular recently for companies to outsource, and it can be a much more affordable and efficient way to run a business. Of course, some companies have services that cost an arm and a leg, but there is a good chance you can find a company that will be within your budget.
In conclusion, improving cash flow for your startup is one of the single most important things you can do to ensure your startup has the best chance of being successful. Hopefully, the tips included in this article can help your startup improve cash flow quickly.
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