SIMPLE CASH MANAGEMENT STRATEGIES FOR STARTUPS

Bottom up process is a task that must be approached with all seriousness and insights. The act of starting and growing a business in today’s competitive business land scape is not something that can be done absent mindedly anymore. Startups must find creative ways to breakthrough and this comes with dedication mixed with the right strategy.

This article would come in series shading some lights on simple but effective strategies that startups can adopt to power their sail to something more meaningful.

Cash management is a crucial factor for every business but even more important to start ups as they need a solid financial footing to be able to make considerable progress. Here are some financial insights that can help along the way:

MIND ON CASH FLOW: cash is everything and for a startup; it is more things than one. Cash position for a startup must be properly strategized such that positive cash flow from operation is achieved in no distant time.

Some of the ways cash flow success can be achieved in a startup are:

  • Outsourcing what you can’t cover your cost let alone make a profit is always a wise decision in business. You can also outsource some business operations that might be impacting negatively on running cost. You don’t need to employ an accountant to have your account balanced each month.
  • Proper revenue and cost management strategy must be put in place from day one. Revenue alone cannot achieve a profit. It is when revenue is properly matched with cost that a profitable net margin results. Every startup must constantly seek ways to increase sales and reduce cost. With the internet and work from home business model, staff cost and operating over heads can be reduced significantly.

BUDGETING: startups that want to survive cannot operate without a well thought out budget. Prudence and financial probity should be a holy grail that every startup must adopt.  Always over estimate cost while under estimating revenue is a wise accounting wisdom that must be adopted. This is not pessimism; it is optimism backed up by realistic expectation which saves you from being reckless with plenty and suffering in scarcity. Startups always have times when cost runs through the roof with revenue just strolling in through the window! Times like these must be met with a good budgeting strategy.

IMPROVE ON QUALITY: The best and cheapest kind of discount is to add quality and not reduce price. Add so much value to your products and offerings that your customers practically lose money and prestige buying from competition.  This is the most profitable discount for a startup. Based on Water Diamond Paradox, a rational consumer would pay a higher price for a scarce commodity. So, if you make your offerings the best in the industry, you create a discount that no rational consumer would want to miss.

HANDLE DEBT WITH CAUTION: debt is a two edged sword and at such, must be incurred cautiously. A good debt is one which has little and reasonable conditions attached to it such that it allows your business breathe and run profitably. Anything to the contrary is a bad debt for business growth. When securing debt to spur business success, make sure you understand the covenants and position your interest properly in the negotiation. Also, it’s advisable to shop around when looking for credit. This helps to considerably reduce your chances of over paying on your debts.

ORGANIZE YOUR FINANCIALS: one of the greatest mistakes that startups make in their beginning years is trying to run a business without having organized financial reports. This is a” no no” for any business that wants to go far. Also, good financial reports help show investors and lenders that you are serious while also helping you separate personal finances from that of the business.

Starting a business is always an interesting journey as it affords one the rare opportunity of trying out ones ideas. However, in doing this, financial issues must be strategized properly so as to achieve the desired results.

To be continued…

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