Top cash flow tips for start ups
By Irene Chong
Starting a business? Here are some easy ways to streamline and manage cash flow, including top cash-flow tips for startups.
Cash is king during all stages of your business, especially when starting out. This is because more often than not your cash outflows in setting up will be higher than the cash you earn from the business.
To ensure that the business continues, it is important to manage your cash flow and debts. Here are some tips to maximise your cash flow when starting out.
Encourage customers to pay early
This might be as easy as requesting upfront payment or providing a small discount for early or on-time payment. Similarly, try to negotiate longer payment terms with suppliers upfront.
Use a charge card or credit card with an interest-free period
There are many facilities that offer different features such as interest-free periods and credit limits. Funding the business on credit is not a reliable long-term solution but can be ideal for short-term cash-flow shortages.
Outsource non-core functions
Non-core functions could include elements of your business such as accounting or tax. This is often a more efficient method of meeting your compliance obligations than committing to hiring long-term employees to complete those duties.
Pay yourself a salary
This is a realistic cost for your business. It will alleviate personal financial pressures and help you determine how much cash your business needs to generate to remain sustainable.
One unavoidable debt is tax debt
Consider how often you should be lodging your business activity statement (BAS) to pay GST or claim back GST from the ATO. Most businesses lodge annually or quarterly. As a startup, it is likely that you will be claiming back more GST than paying. Consider electing to lodge your BAS on a monthly basis. While this means it might take more time to prepare your BAS every month, you should be claiming back GST two months sooner than if you were doing your BAS quarterly.
Cash flow is a fundamental aspect of any business. Use these tips to help get your startup off to a solid start.