How to Improve Cash Flow for Your Startup

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October 16, 2018
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Cash flow is one of the main hurdles a startup faces, especially in its early days. As the company strives to grow and flourish, working to attract high-profile customers and improve their assets, money can be tight.

Cash flow gives startups the opportunity to reinvest in the business, taking it to new heights. Here are some of the ways you can improve cash flow in your startup.

Perfect Your Invoicing Strategy How to Improve Cash Flow for Your Startup 1

Rather than having completed work sitting around unpaid, put some extra attention into creating a powerful invoicing strategy. Being efficient in your invoicing helps improve customer payment time, which gives your startup more cash flow to work with.

Start by using a professional looking invoice template (view here: free self-employed invoice template by FreshBooks) and setting a time each week to send out invoices. Consider adding incentives for early payment, such as a small discount. Alternatively, add interest to your payment terms for those customers who delay their payment past the due date. Make these incentives or demerits obvious both in your customer agreement and on the invoice itself. By having regular invoicing time scheduled and a standardized form, you simplify the invoicing process as to not tax the limited human resources of a new startup.

How to Improve Cash Flow for Your Startup 2Look for Investors

Sometimes it takes the right connection to improve your business. Look for investors who have an interest in your startup to give you funding that will increase your cash flow and make it possible to achieve your business goals.

Think outside the box when looking for investors. Look for connections through your university or other contacts in the industry. Alternatively, look at a crowdfunding campaign that gives investors something specific to repay them for their support. Clothing mogul Kortney Olson of GRRRL Clothing recently launched a successful crowdfunding campaign which brought upward of $100,000 into the company. This infusion of cash will help the startup reach its goals in the growing athleisure industry.

When seeking investors, don’t just ask for money; put together compelling evidence about why someone should invest. Tell them where their money will go, and how that will help your organization reach its goals. Be ready to answer tough questions and face some rejection.

Get a Loan How to Improve Cash Flow for Your Startup 3

Getting a loan isn’t the best way to improve cash flow, but it will work in a pinch. However, you need to ensure that you can be a responsible borrower, taking only what you need and paying it back in a timely manner. Look for a loan with a term that suits your business needs. Generally speaking, you’ll pay less for a short-term loan if you know you can pay it back on time. Alternatively, you may get lower interest rates for a long-term loan.

When getting a loan, do so from a reputable loan agency or bank. If something sounds too good to be true, it probably is. Read all the fine print to ensure that you understand the terms of the loan.

How to Improve Cash Flow for Your Startup 4Closely Monitor Expenses

Within the first few months of operating your startup, you should have a decent idea of where your money is going. If you don’t, you’ve failed to create a proper budget and should do so immediately. As time progresses, you may find that the tools you’re using aren’t right for your business. Additionally, you may discover that you’re paying way too much for travel when you live in a remote world.

By closely monitoring your expenses you can determine what’s necessary, what’s not, and where your organization is hemorrhaging money and putting your longevity at risk. Having these insights gives you the knowledge you need to trim the fat. Take some time to go through your startup’s expenses and re-evaluate your situation, making the cuts you need for improved cash flow.

If you have a startup, you’re likely no stranger to thinking outside the box. Apply this same creative thinking and innovative spirit to improving your cash flow. Careful planning and execution will ensure that your startup lasts for years instead of being a flash in the pan.

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