Sift through the studies, seek out the stats and you’ll see that poor cash flow management fueled many a start up’s failure. Intrinsic to running a successful business, you’ll need to keep a keen eye on your cash flow to succeed as an entrepreneur.
Without the adequate expertise it’s easy to come undone, so to spare you from becoming another depressing statistic, here’s an assortment of cash flow tips for the college entrepreneur…
Get cash in quickly
One of the keys to succeeding as a start-up is getting money coming in sooner, rather than later. Cash is the lifeblood of a business after all.
To do this, attempt to rid your business of the shackles imposed by conventional invoicing such as a month or more payment terms. Ask for payment upfront instead. If your product or service is good enough then your customers and clients should oblige. Believe strongly in what you’re offering and demonstrate to clients that it’s only fair that they pay up front, so as to reimburse the costs you’ll incur adding value to their business.
Elsewhere, do some sums and see what you can offer customers and clients in the way of discounts. Offer these to customers who bulk buy or commit to your service for a lengthy period of time. If you’re just starting up, this should get money into your accounts sooner rather than later.
Where reasonable, delay outgoings
Now, this will sound a little hypocritical given what I’ve just suggested, but when paying your initial expenses, try where possible to delay them.
Reiterate to debtors that you’re in the process of building your business and that’s money tight with those initial sales slowly but surely coming in. See what extended terms you can get and, if needed, negotiate them when and where they’re possible.
This can help avert any cash flow crises but, once you’re fully on your feet, get into the habit of paying debtors promptly. A bit of good will can go a long way and likewise, be prepared to help your fellow businesses out should they be in payment peril (…as long as they’re not a competitor!).
At the same time look at what you can outsource. Bringing in equipment and staff can be costly, so try to avoid this until you’ve got the financial capacity to cover the costs involved.
Forecast your finances
Elsewhere, forecasting is something you ought to do regularly, as this can better inform your cash-flow management strategy.
At the most basic level, this will involve projecting potential income and then contrasting it with potential expenditure. Ideally this should be done every week, if not every month, as it’ll provide you with a better picture of how strong or weak cash-flow might be in the coming days, weeks and months.
Done well, forecasting can serve as a guide, illustrating when a change in tactic might be needed to help you bridge a difficult period ahead.
Mark James is a Writer who specialises in Business and Finance. He currently works in-house at online accountancy firm Crunch and is based in Brighton, a seaside city 60 km south of London