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2016-01-13 00:00:00Cash FlowEnglishManaging Your Cash Flow: No business can sustain itself without cash and one of the most important aspects of managing any business, is... and Managing Your Cash Flow

Improving and Managing Your Cash Flow

2 min read

No business can sustain itself without cash and one of the most important aspects of managing any business, is managing the cash flow. Entrepreneurship is not just about doing business; it is also about managing the money for your business. Unless your cash-flow is right, you will find it very challenging to sustain and grow your business.   Here are a few tips that will help you ensure an effective cash collection system:

  • Limit your free trials: To ensure that competition is driven out of the market, many startups try to acquire customers by providing free trials. The core assumption is that, predatory pricing strategy and freebies helps you to quickly grow your customer base and recover losses at a later stage. This is not always true. At times, the losses might be too much to recover at a later stage. So it is extremely important to implement a free trials offer carefully and thoughtfully.


  • Spend wisely: You have to be able to understand what every rupee is getting you. This means that if you need only 10 computers in your office, do not invest in 20. The productivity of your employees is also a major concern when managing your cash flow. If you are paying more money to an employee than he is generating for you- you should think of replacements. Every rupee you save is another rupee you earn. You could use this money to expand and make your business thrive.


  • Manage your inventory in a smart way: It is very important that you correctly access the amount of products required for your inventory and not over-stock. Many startups tend to overstock which leads to higher inventory maintenance costs and this can be controlled once these startups start managing their inventories smartly.


  • Handle your invoices with care: Make sure you send your invoices well in advance to your customers and keep tracking them. Also, have a system in place to follow-up on those invoices. Sending late invoices is never a good idea because it is the equivalent of asking your customers for late payments.


  • Make a clear budget: It is necessary to make a clear budget and record all the spending. While budgeting, you will get to identify and eliminate unnecessary spending. Over time this money will only accumulate and add up to the valuation of your company in the form of liquid assets. A clear budget will also warn you of any financial problems that you might face in the near future. So, you can avoid such problems even before they come on to you.


  • Bill upfront: Ask customers for payment on delivery. Automated billing processes are a good idea. It is also a good idea to encourage Credit Card payments. You could also enforce or encourage pre-payment by providing your customers discounts or incentives for paying up-front. Remember, you could always balance out the discounts that you give by placing that money in returns oriented options.

It is essential to structure your cash flow in such a way that it works for you and not against you. Ideally, you receive payment for the actual value of the products or services you provide during a specific time period. So, it is a good idea to focus on renewal marketing once a year rather than once a week or once a month. As a startup, it is important that you get your hard-earned money on time, spend it wisely so as to create more room in your budget to expand and thrive.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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