Cash flow tips for startups
When you are just starting out in business, every penny is accounted for. You know exactly what is coming in, as well as going out, and you monitor it closely. A lot of startups don’t get a whole lot of funding in the early days, especially when bootstrapping. So knowing exactly what is going on with the business finances is a must. The only problem with this is that if there is a problem with cash flow, such as someone paying your invoice late, then it can cause some issues meaning that you have to pay someone late, or dip into an overdraft, for example. So how can a small business startup improve cash flow? Here are some things to think about and put in place; it can make such a difference.
Outsource to save on hiring costs
Having staff is one of the biggest costs that are associated with businesses. You don’t want to have too many staff to start with, because you just don’t know what the need will be. And when you have staff, you have to think about things like sickness pay, holiday pay, and insurance or other benefits. So if you aren’t in desperate need for staff, you could choose part-time staff. You could also think about outsourcing to others too. This can save a lot of money as you only pay for the specific job that they do, whether that be marketing, social media management, accounting, bookkeeping, or designing your website.
Rent instead of buying
When it comes to an office space or equipment that you will use for the business, starting out it makes a lot of sense to rent, rather than buy outright. Buying outright means a lot of money upfront, which can be a cash flow problem in and of itself. Renting means that you know what you will be paying each month, and it will be kept the same. Hiring equipment can also mean that if there are problems with the equipment, that isn’t caused by you, then the owner will be the one who needs to repair it. So for anything from crane hire to computer hire, you could look to do that for your business rather than buying. Eventually you might be in a position to buy, but to start with, renting or hiring is where it is at.
Benefits for early payments
One of the main problems with cash flow comes when you’re not paid on time. When you know you have staff to pay or rent costs to pay, at the same date each month, then you need money in that month at that point. So in order to encourage this, and help your cash flow, you could offer an incentive to your clients or contractors if they pay early. They could get a certain discount off next month if they pay early this month, and so on. Not all businesses will be in a position to pay early, but if they are, they will be more likely to do it when there is a benefit to them doing so.