Published on December 9th, 2014 | by Jose Vasquez1
4 Ways Startup Tech Companies Can Stay Cash Positive
Cash flow is sometimes difficult to keep positive, but these four simple tips can help you keep your financial flow running smoothly.
Startup tech companies need financial power in order to start, expand, or even just remain consistent. Cash flow is distinct from sales or profit, but is very important if you’re going to pay your bills on time and keep your business running. Regardless of the strength of your sales or your profit margins, you’ll need to keep a close eye on your cash flow.
Cash flow can be broken down into many different specific types, but the concept boils down to the amount of financial resources you can access at a given time. Positive cash flow means you have access to funds and high liquidity. Negative cash flow means you have limited to no access to funds and low liquidity.
These four easy tips can help you stay cash flow positive:
- Get a line of credit. It’s not always possible, but setting up a business line of credit when your business is stable is a good idea. Only tap into it when you absolutely have to. This way, you’ll be more likely to stay on track but you’ll still have an emergency line should your cash flow be in jeopardy.
- Request money up front. Depending on the nature of your technology, you can ask your customers to pay for your product or services up front. In cases when that isn’t possible, consider asking for a down payment of 25 or 50 percent. This will increase your money’s availability.
- Manage your receivables. It’s easy for startup companies to lose track of some of their receivables, especially when business begins to accelerate. Invoice early, keep your deadlines relatively short, and keep track of receivables that are close to do or overdue.
- Pay your bills as late as possible. If you have 30 days to pay a bill, wait until day 30 to pay it. It’s a simple strategy that can help your money stay available for longer.
With careful management, and adherence to these four simple strategies, you’ll be able to stay on top of your startup tech business’s cash flow and nurture the financial future of your enterprise.