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How to Better Manage Your Cash Flow as a Startup: Our Guide
When even established companies find it challenging to do a cash flow analysis, you can expect young businesses to struggle with this task even more. Chances are, you started a business because of your passion for a particular industry, or it could be because you want to show the world your talent and skills or achieve a lifelong dream. But whatever your reason is, one thing is for sure – you want to gain profits!
One of the best ways to gauge your progress is by looking at your cash flow. Yet, it’s not so easy to understand it all. But because you are a business owner, you need to know how to manage your cash flow efficiently and properly.
Here are four effective ways to manage your cash flow as a startup:
1. Know where the money is coming from and where is it headed.
As a startup company, you need to have a clear understanding of where you are getting your cash from and where you plan to spend it. Don’t make the mistake of overlooking cash flow statements because these serve as your records. You must highlight the inflows and outflows, the average revenue per account, and the operations’ cost.
2. Consider the bigger picture
While the cash flow statements will give you an idea of how your cash flow is going, there may be a few factors that affect them. For instance, there may be a few late payments that are not reflected, and this can give you a false idea of having an excellent financial status. Similarly, a recent big purchase may make it seem that you are financially in danger, but if it improves your productivity and profitability, it’s putting you in a better position. For this reason, you must not solely rely on those statements and always see the bigger picture.
Cashflow Video Guide
Learn the simple steps to prepare cash flow projections to improve your business cash flows.
3. Have a solid cash flow management plan
One effective way to manage your cash flow is by coming up with a management plan that you can easily follow. But you should not copy from anywhere but make this plan yourself because your business is different from that of others. You also have your own needs and obstacles that you need to overcome. With that said, some features must be in every cash flow management plan, including identifying cash flow obstacles, recording day-to-day expenses, and preparing to improve overall cash flow.
Make sure you have detailed documentation, as this will not only help you keep track of your cash flow but also serve as a great tool to attract investors in the future!
4. Measure all financial metrics
Keep in mind that you must not solely focus on how much income you are making. It is easy to make this mistake because that’s what’s important, right? Well, it is, but so are other indicators. You need to thoroughly understand cash flow as it gives you a clearer idea of how your business is performing!
Conclusion
As a startup company, you might be overwhelmed by all the things you need to take care of. From making sure that your products or services are of high quality to dealing with your customers, it can’t be easy to add more tasks like managing your cash flow. The good thing is, you don’t have to be the only one handling it all. You can outsource your accounting and finance needs to a reputable accounting advisory partner who can help you manage your cash flow and simplify this aspect of your business. This way, you can solely focus on growing the company!
FiBrick is an accounting firm that’s dedicated to helping startups in New York, NY, reach their full potential. We can take care of tasks like cash flow analysis and other things related to your business’s accounting and finance side so that you can continue doing what you do best.
Contact us today to schedule a consultation with one of our experts!
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