How to maintain positive cash flow as a start-up

One of the biggest challenges for any new business is the ability to be cash flow positive at all times during the year. When times get tight and profits dip, you may feel a pinch in your working capital and need a way to build these monetary reserves back to their peak. The opposite is true when profits skyrocket and you’re making money: feel the beneficial weight of some extra funds sitting in your ready-to-spend cash flow reserves. But you need to match this cyclical trend with positive cash flow throughout the year. Here are some ways you can keep your working capital positive throughout your sales cycle.

Prevent Overspending

One of the easiest ways to control your cash flow is to stop overspending when you really don’t have to. It can be tempting to buy the latest and greatest of everything for your business, but if tomorrow’s sales are down, you’ll find your stocks are a little tighter than usual. Spend wisely on what you need for your business start-up to survive each day. This can help you have the cash you need when a problem arises without having to scramble to find financing.

Stay on top of billing

Getting paid for the work you have done is an arduous task for any startup. It’s no fun chasing late payments, but it’s your responsibility as a start-up business owner to make sure your billing comes out on time and is paid. Getting your billing in order can ensure that you have a steady stream of income and have money left over for positive cash flow at the end of each month.

Track daily costs

Keeping good track of your costs throughout the year can help you better identify where you’re overspending. You may need to monitor your spending, but without tracking it, you have no way of knowing where your cash flow is going each day. Keep track of all the expenses you make every day and review them to see where you can cut back. You may be making unnecessary purchases that are adding up and taking a toll on your working capital.

keep a cushion

If you know that your start-up business has problems from time to time with its working capital, you can plan for these times by setting aside a cushion of funds that you can rely on when you need it. This can make your slower months easier to bear and give you a solid reserve you can count on when an emergency arises. It can give you some extra reassurance that you have the funds when profits dip and keep you in the black all year long.

Estimate future earnings conservatively

When you look ahead, it can be easy to overestimate what your earnings will be next year. You can anticipate sales that do not come to fruition or that unexpected circumstances could arise. To keep your cash flow positive, be realistic about your future earnings and plan for the unexpected, so you don’t end up in a situation where your working capital disappears without warning.

sales increase

While it goes without saying that increasing your sales can help increase your cash flow, this is an area where new businesses can fall behind. Think about the ways you can add value to your offerings and entice customers to buy more than ever before. Bundles and add-ons are easy ways to get a customer to spend more with you and help increase your sales in a given month. You need to consider all the ways you can get each transaction to its maximum value so that you can have that extra working capital after your accounts receivable, payroll, and expenses have been paid.

Secure a short-term investor

Short-term angel investors are a surefire way to jump start your business and get the financing you need to help you with your cash flow problems. They can help provide funds when times are tough and allow you to breathe a little easier with their financial support. A short-term angel investor can provide you with money to grow your business while maintaining the daily flow. Repaid in a shorter period of time, these seed investors help give you more flexibility and provide an alternative means of securing start-up financing for your business.

Create Loyal Customers

Converting your customers into loyal fans who frequent your business on a regular basis can help you increase sales and increase your profits all year long. These repeat customers can give your business the boost it needs while helping your working capital skyrocket with every purchase. When you can count on a customer coming back to your business, you not only ensure another sale, but you also make it easier to project future sales and keep your cash flow from falling into the red.

Keep inventory tight

Making sure you don’t overflow your inventory can also prevent negative cash flow for your startup business. Practice being lean and only have the inventory you need at any given time. This can make a difference to your business results and improve your cash flow situation. Having products and materials on hand can be good, but it can affect your ability to have cash reserves when you need them most. Keeping inventory to a minimum takes a special hit, but you’ll find that your operations are just as efficient and you won’t have to wait months to sell your order book, hitting your monthly working capital.

Taking stock of your cash flow on a daily basis can ensure that it flows positively every month. These simple tips can help you stay in the black and make your working capital less of a concern for your business startup. Planning ahead, staying tight, and increasing your sales will ensure that you have the cash reserves you need to keep your startup business afloat all year long.