When you run a
startup, the budget is often limited and the cash flow is often low. However,
you need to be able to spend money to make money, meaning you need some liquid
assets. There are a few ways you can accomplish this in the early days, some
with better results for your business than others.
Taking risks is a
part of being an entrepreneur, but you want to make sure those risks come with
ample reward to make them worth it. Here is how to improve cash flow for your
startup without sacrificing everything you’ve worked for.
Invest in the Right
Tools
There are tools you
can use to make your business run smoothly without breaking the bank. In fact,
many of the tools entrepreneurs use for their startup have a free version
online. It’s all about knowing where to look. Graphic designers may take
advantage of the tools entrepreneurs use while virtual assistants often use Trello to stay
on top of projects.
Don’t be afraid to
spend a little money on tools if it means cutting back other costs, like labor.
There’s a fine balance between being frugal and being cheap to the point of not
being able to see the forest for the trees-- be the former.
Create an Effective
Budget
Creating
a budget seems like an obvious task when creating a startup, yet many
entrepreneurs skip this crucial step of the process. Creating a detailed budget
allows you to track expenses and determine if you’re overspending in a specific
area.
Think of it this way:
you buy yourself a coffee every day on the way to the office. It’s about $2 a
day, which is nothing. Sometimes, you’ll spend a little extra and buy a
breakfast sandwich as well. At the end of the year, you’ve spent over $800
without even being aware of it.
The same idea applies
to a startup business. Those little expenses add up, and by getting ahead of
them and using a budget, you can reallocate funds to improve your cash flow.
Encourage Fast
Payments
Find ways to entice
your customers to pay early. Many businesses, like yours, try to improve their
cash flow by waiting until their invoices are almost due to pay them. Consider
offering some sort of reward for fast payment, such as a discount that is
applied if the invoice is paid within a set period.
Another way to
encourage fast payments is to make it as simple as possible for your customers
to pay. Abandon checks in favor of electronic transfers, credit cards, PayPal,
etc. Ensure that your internal processes are efficient so that invoices go out
in a consistent, timely manner as soon as an order has been fulfilled.
Smart Borrowing
Requiring a business
loan isn’t the end of the world and can help you grow your business, as long as
you borrow wisely. Before applying for any sort of loan, do some research to
determine which type of loan would work best for your needs. Create a plan regarding
how much money you will require and outline what it will be used for. Take only
what you need and make your payments on time.
It will be up to you
as the owner to practice willpower and control. Stick to a budget and don’t be
tempted to spend on excess or luxurious items because you have money in the
bank. Stay with the plan and use this as an opportunity for advancement.
With careful planning
and savvy business sense, you can keep your startup afloat by improving your
cash flow. Take smart risks that promise a reward and manage your expenses with
care and consideration if you want to be successful.
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