5 Strategies For Boosting Your Startup Business’s Cash Flow

By Pantea I. Fozouni

March 14, 2022

Although cash is the lifeblood of every business, far too many business owners fail to properly manage their cash flow. And this is the case despite the fact that running out of money is one of the main reasons new businesses fail.

Trying to run a business without carefully managing your cash flow is like fighting a rising tide: sooner or later you are going to find yourself underwater.

Even if your business generates healthy revenue, you can still experience the occasional cash crunch—which is especially true during your first few years of operation.

To avoid joining the ranks of bankrupt startups, get smart about boosting your cash flow by implementing these 5 strategies:

1. Get Professional Support

To save money, lots of new business owners try to manage their books on their own, but this is a major mistake. Managing cash flow is too time consuming, complex, and critical to your company’s survival for you to fit it in with all your other responsibilities. In fact, the very first team member you hire should be a professional bookkeeper/financial manager.

Effective cash-flow management is the foundation upon which all your company’s financial and tax strategies are built, and it needs to be done properly from the very beginning. With this in mind, even if you have not yet earned any revenue, consider paying for a bookkeeper out of your own pocket.

Hiring a highly experienced bookkeeper with whom you can build a tight relationship might require an investment of time and money upfront, but the ultimate payoff in terms of your financial strategy and tax savings will more than make up for the initial effort and expense.

I have great referrals for experienced, trustworthy bookkeepers and CPAs here in the Coachella Valley—please reach out if you would like some guidance. Your business will thank you.

2. Implement Financial Systems

Above all, effective cash-flow management requires sound systems. If your company’s financial systems and processes are not set up the right way from the start, even a skilled bookkeeper won’t be able to magically fix them.

As your business attorney, we focus on supporting startups to set up effective financial systems. We will help you put the proper systems in place to manage your cash flow and ensure your company has a rock-solid financial foundation that will not collapse when the going gets rough.

3. Closely Monitor Accounts Receivable

Many startup businesses experience negative cash flow simply because they do not stay on top of accounts receivable. We see this time and time again. Heck, we were even guilty of it ourselves when we first started Palm Desert Law Group, APC.

You must ensure that your customers pay you on time and in full. Accounts receivable that go unpaid for too long are more likely to get overlooked and go uncollected.

Your bookkeeper should keep track of all accounts receivable and include them in your monthly financial reports. Having these details included in your reports will not only keep you aware of your company’s financial health, but it can also allow us to better assist you if and when you ever need support with collections.

4. Get Paid Upfront

One easy way to boost your cash flow and eliminate headaches associated with accounts receivable is to have your customers pay their bills upfront whenever possible. This is especially true if you have clients who are consistently late with payment. One great way to encourage this is by offering a small discount if they pay with check or ACH bank transfer. That way, you get paid in full, your clients get a small discount, and you don’t have to pay credit card fees. Win, win, and bonus win.

If full payment upfront is not feasible, even requiring a partial payment as a deposit will improve cash flow. Also, make sure you have a firm policy in place that penalizes late payments, and make sure your sale agreements clearly spell this policy out—you just have to make sure to consistently enforce this policy with all late paying clients.

5. Maintain A Cash Reserve

Just about every startup business experiences revenue shortfalls and your company’s survival will depend on how you handle lean times. To shield your company from the inevitable slow periods and unforeseen emergencies, try to maintain a cash reserve—even if it is just access to a line of credit.

Having a reserve to fall back on will protect your company’s financial health and it will save you from the stress and desperation that comes from unexpectedly running out of money. Nothing will kill your team’s morale—and your company’s growth—more than finding yourself unable to cover payroll.

Keep The Cash Flowing

All the vision and passion in the world will not keep your startup business afloat if you fail to properly manage your cash flow. That said, you don’t have to be a financial genius to keep your revenue flowing freely. You just need the proper systems and support. We can support you with both.

When we meet for a LIFT your Life and Business session, we will assess your current financial systems and advise you about additional ways you can shore up any weak spots in your company’s foundation. Getting a handle on your cash flow will prevent your startup from running out of money, and it will also free up your time and energy to focus on the big-picture responsibilities needed to ensure your business truly thrives. Contact us today to get started.

Call Us Today at 760.674.7175
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Palm Desert Law Group, APC

74-710 Highway 111, Suite 102

Palm Desert, CA 92260

Tel: 760.674.7175

Fax: 760.610.6641


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