Cash flow is the money you can invest and use for all sorts of day-to-day operations, upgrades and management trends that your company needs to deal with. Still, maintaining it is easier said than done. First of all, you’ll start in a massive deficit, due to the fact that a portion of your profit might end up reserved for paying a hefty interest rate you’ve taken for a launching loan. Second, you might find that not all of your customers are as conscientious, while some of your debtors might just outright refuse to pay. Finally, the majority of your customers might go with credit payments, meaning that while, on paper, you do have the funds, you don’t really have this cash at your disposal. Here are some of the tips on how to move past these problems.
Sell your invoices
One of the things we mentioned in the introduction is that you might not have the time to wait for all your account receivables, but do you really have a choice? Well, yes, actually you do. Instead of waiting for them to arrive, you can actually sell them to a factoring company. In this way, you’re relinquishing 1,5 to 5 percent of their entire worth as a standard factoring selling fee in exchange for the cash you can work with. The benefit of this lies in the fact that you’re virtually selling an asset instead of applying for a loan.
Hire a debt collection agency
Inexperienced entrepreneurs hate the idea of strong-arming their clients for their money, even though they may not have another choice. The problem with this idea lies in the fact that they just can’t let this slide. Think about it, if you are owed money by some of your clients and you owe money to your employees, suppliers and utility company, you don’t really have a choice. From this point of view, these unconscientious clients aren’t actually withholding your money, but the money of your clients. In this scenario, hiring a collection agency is your only choice.
Get another loan
The greatest downside with applying for loans as a solution to your cash flow problem lies in the fact that you need the money immediately and might not be able to wait for our application to be submitted. On the other hand, if you can find a reliable online lender that offers fast loans, you might circumvent this problem altogether. To make things even better, some of these loans go as low as $500 and you can return it in as little as 3 months, meaning that, in this scenario, you could return $46.19 per week and be done with this issue as soon as you’re back on your feet.
Keep your day job
One of the most controversial tips you can ever receive is the fact that you should probably keep your day job for the time being. This is due to the fact that most people can barely manage a business as a full-time job, let alone as a side-project. The problem, however, lies in the fact that you might just need that main job as an additional source of income. This alone may force your hand and postpone your idea of quitting by a little bit. Unfortunately, seeing as how quitting their day job was one of the main motivators for starting their own business, this might be a tad harder and more unpopular than it may seem in the beginning.
Sublease your office
In order to be able to scale into their workplace, a lot of smaller entrepreneurs tend to lease out a tad bigger office, which, also means a higher rent. However, it also creates an option of subleasing an office, by accepting a small secondary team of sub-tenants. Nowadays, this might be even more effective, due to the fact that so many freelancers and telecommuters hire workstations in shared offices. This would allow you to make independent contracts with individuals, rather than making B2B agreements with other startups. Needless to say, this tends to make things a tad simpler to manage. Just make sure this doesn’t rub off your landlord in the wrong way.
Automate your account receivables
The last thing you need to do in order to have a steady cash flow is automating your account receivables in order to create a scenario in which you can predict your income with a much greater precision. In a scenario where you’re providing a service that needs to be paid for on a monthly basis, you can seamlessly transition to this model of payment. This also provides you with a somewhat greater return customer rate, seeing as how canceling a subscription tends to be somewhat more difficult than just not making a purchase. Overall, there are numerous online payment gateways that can help you make this happen.
At the very end, the value of the cash flow you need to maintain varies depending on your industry, and your overhead. This is why by lowering these, you might have it much easier to keep a positive cash flow running. Most importantly, none of these trends are startup exclusive, nor do they stop being useful or relevant once your business starts growing or scaling up. This is why these skills are more than worth acquiring, regardless of your business’ current status.