cash flow concept

How Start-ups Can Manage Their Cash Flow

Running a start-up is exciting. For one, you have the opportunity to come up with something game-changing, perhaps an innovative product or service that will bring good things to customers’ lives. You also get to meet smart and wonderful visionaries. And if you’re lucky enough, you get to meet investors who believe in your products, thus their willingness to put their money in your pockets.

While the budget might not be a problem for an investor-funded start-up, one should not forget to manage the money properly. Remember, you need to prove to your investors that they have not made a mistake. You need to show them that your idea is profitable. And you need to show them that you can be trusted with money. This is something that you can do by organizing a good cash flow.

If you are not so sure where to start, here are some things you might want to bear in mind:

Be mindful when spending

Some start-ups are too confident about the huge amount of money that they have been entrusted with. They might reach the point where they have the impression that they will never run out of money. However, you must learn how to spend steadily and slowly. Every decision that requires purchase, such as getting equipment or hiring people, should always be considered carefully. The goal here is to make sure that you have enough money for essential business operations while minimizing debts.

Focus on product development

If your product or service is not yet out of the market, you need to spend time improving and perfecting it. And it requires lots of money for prototypes or redos. Make sure that you have allocated more than enough money since this is is the core of your business. You might not want to ask for your investors’ help or ask a legal money lender to help you fund the product development again just because you have spent too much beautifying the office.

Consider outsourcing

hand shakeYou might be quite excited to find people who will work for your company. But you might want to put that off for a while, especially if your start-up is not yet making money. Minimize your spending by outsourcing activities and requirements to third-party suppliers. These can include non-core functions, such as finance and HR. Hiring and onboarding employees can prove to be much more expensive than outsourcing.

Collect payments

When you have already launched your products or services, and people are already clamoring to try them, you need to make sure that payments are collected. For one, you can make a rule to ask customers to pay upfront. This way, your cash reserve will be replenished quickly, meaning you will not run out of money.

As a start-up owner, your goal is to make sure that your company is in good shape until the launch. And that might require you to be conscious of all your spending. Moreover, it is equally important to have contingency plans and funds to make sure that your cash flow will follow a continuity in case something unexpected happens.

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