Published on January 23rd, 2018 | by Jose Vasquez0
Why Cash Flow Is So Important in Startup Tech Companies
Cash flow is one of the most important elements of your business to consider.
When planning your business and building it from scratch, you’ll likely think about its market appeal, its competition, and its profitability as the main indicators of its eventual success. But there’s another factor that can make or break your company—regardless of how profitable you are on paper: cash flow.
Cash flow refers to the amount of money you have available, on hand, to pay your bills, your vendors, and your employees. Even if you’re technically “profitable,” it’s possible to go cash flow negative, which can seriously jeopardize your operation.
How to Improve Cash Flow
So what steps can you take to stay cash flow positive as long and as consistently as possible?
- Stay proactive. First, you’ll need to make cash flow management a main priority, and stay proactive when managing it. Don’t just react to a bad situation; prevent bad situations from arising in the first place.
- Assign the responsibility. Assign someone to be responsible for monitoring cash flow, whether it’s you or your CFO. Someone should have an eye on your cash flow levels at all times, and be responsible for taking intervening action when necessary.
- Minimize expenses. This is an obvious step for most startups, but do what you can to minimize your overall expenses. The fewer financial responsibilities you have, the less likely you’ll be to get into a bad situation.
- Time your payments. When paying bills, wait until the last possible date for payment. That way, you retain the cash in your accounts for as long as possible—without any negative repercussions.
- Have a good collection strategy. This is key. When collecting payments from your customers, have a consistent, prompt collection strategy. Try to get payments as soon as possible, and if someone misses the payment date, have a strategy in place to follow up with them until you can receive payment.
If you need some help with your startup’s financials, or just getting started as a business owner, I’m here to help. Contact me today for a one-on-one consultation to see how I can help you become successful!