Effective Cash Flow Management Tips for Entrepreneurs and Startups

Managing a business can be both exciting and daunting. That adrenaline rush you get as one thing happens after another is simply exhilarating! At some point, you get to thinking, “how long can we sustain this constant worry about money?” In those times, you need to look closely at your company’s cash flow and learn how to take better care of it.

For entrepreneurs and startups, not paying attention to their cash flow is one of the biggest pitfalls one might encounter, as that’s when things start to go downhill! Even Fortune 500 companies end up shooting themselves in the foot if they’re not careful with how they spend their money.

Here are a few tips on effectively managing your cash flow to ensure you don’t fall down the same hole.

Prioritize Spending to Improve Cash Flow

Many small businesses and tech startups splurge on things they probably don’t really need or spend money at the wrong times. Knowing your company’s needs is of the utmost importance. Yes, it’s nice to have the latest devices and other perks for all of your employees. However, if you want success for your startup, you may want to forget about all the bells and whistles for now! They’re actually not as effective for retaining talent as you think they are. Instead, keep your spending focused on revenue-generating activities and save your efforts for building a great company culture.

Building Cash Reserves for Financial Stability

In the event that money stops coming in for your company, what’s keeping you from going bankrupt and shutting it all down? What you need is a reserve fund or what is known in the industry as “rainy-day reserves.” A cash reserve will help you stay afloat and buy more time to bounce back and continue to operate your business.

At some point in any business venture, a “rainy day” will come when income is disrupted, and you’ll be happy to have a contingency plan in place. Having enough cash reserves to ensure operations for the next 3 – 6 months would be in the company's best interest.

Efficient Cash Flow Management with Automation Tools

Most business owners usually end up managing the money that goes in and out of the company. There’s nothing inherently wrong with that, but it involves too much work and requires specific financial knowledge. The time you spend struggling with doing your own accounting could have been better spent developing your products or actually growing the company.

A good solution is to streamline the process of managing your cash flow. Instead of getting buried in a mountain of paperwork and Excel spreadsheets, you can rely on technology to help you out. From accounting and bookkeeping to supplier management, apps for automation are there to help you get on top of things. Instead of focusing 80 percent of your time on managing the money, you let the robots do the work for you—and most importantly, invest in a good CPA or fractional CFO.

Conclusion

Managing the cash flow of your business should always be a top priority if you aim to become successful. It helps to keep everything in check by streamlining your process and making sure you don’t overspend on unnecessary luxuries.

To make things a bit easier for your startup, we recommend getting help from someone you can rely on. FiBrick is a people-centric accounting firm that stands as the perfect partner for startups. We offer a suite of services to help you manage your cash flow effectively. Contact us today to get started!

Free resource: We created the Cash Flow Template and how-to-video that provides a step-by-step tutorial on how to better manage your cash flow so that you can transform your business from small to mighty! Dive into Cash flow Projections here .