If you're starting a business, you're likely familiar with the grim statistic that 82% of startups fail due to poor cash flow management. But don't let that discourage you! With the right strategies in place, you can avoid becoming a part of that statistic and keep your startup thriving.
The first step in managing your cash flow is knowing where your money is coming from and where it's going. Use accounting software or spreadsheets to track your income and expenses and get a clear picture of your financial situation.
Once you have a handle on your cash flow, create a forecast to project your future income and expenses. This will help you anticipate any shortfalls or surpluses and make informed decisions about how to allocate your resources.
One of the biggest culprits of poor cash flow is overspending. Keep your expenses in check by negotiating with vendors, cutting unnecessary expenses, and optimizing your cash-to-cash cycle.
Late payments from customers can wreak havoc on your cash flow. To avoid this, stay on top of invoicing and collections by sending out invoices promptly and following up with reminders and phone calls when necessary.
No matter how well you manage your cash flow, unexpected events can still occur. Be prepared by having a contingency plan in place, such as a line of credit or a cash reserve, to help you weather any financial storms.
"Managing cash flow is critical for the success of your startup. By tracking your cash flow, creating a forecast, managing expenses, staying on top of invoicing and collections, and having a contingency plan, you can avoid the pitfalls that lead to failure and keep your business thriving." - Jeroen Biesbroek, founder of Metics.
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