How do startups make it through the teething stage, with access to little or no capital? How do some companies succeed in tough times, like the GFC? In this second instalment, we take a lesson from early stage ventures and ask, “How can you think like a startup to improve your cashflow?”
You’ve probably already read and applied the Eric Ries’ concept of The Lean Startup, a sort of latter-day bible for the owners of cash-strapped entrepreneurial ventures.
It’s time for a refresher. If you want to hang on to your cash, perhaps it’s time to take a lesson in startup thinking. How could you run your business like a startup, even if it’s not?
Let’s take a look at what that means.
Pay your bills late when nobody gets hurt
Got a 10-day grace period on the utility bill? One way to keep capital flowing is to wait until the last day to pay. Of course, there’s no reason to do this if you’re not strapped for cash. But startups usually are and, because of that, they quickly gain a keen understanding of how large organisations manage their collections. And, the bigger they are, the longer it will take before they go medieval on your arrears. Just be sure to get all your payments taken care of before you incur any late fees. And don’t apply those tactics to suppliers with less weighty coffers.
Never pay earlier (unless it saves you money)
Unless there’s an early payment discount dangling out there for you, why pay early? If there’s nothing in it for you, all you do is thin your cash when you pay early. There’s no impetus to do that, unless you can justify it by saving 10-per cent or so thanks to an early payment discount. Otherwise, forget paying early, because on time is good enough for muster.
Work with a bank that knows where you stand
Some banks treat all businesses dispassionately the same. The same fees, the payment schedule, the same penalties, the same credit terms. But not all businesses are the same. Some are century-old instituions; some businesses are just beginning to take baby steps.
You’ll want to look around to find a bank that will grow with your business. Some banks provide startup packages that offer no transaction fees for the first couple of years for a startup. If you’re not a startup, see if you can find a similar or equivalent package for your situation.
Account for your accountant
Are you outsourcing non-core functions, like accounting? Thanks to Tim Ferris’ international bestseller, The Four Hour Work Week, many businesses are doing that, especially startups, outsourcing, out-tasking and generally finding faster and cheaper ways to get things done.
As a business gets larger, ways of doing business take hold. A startup founder, however, does not have a history of doing things a certain way. So, she simply seeks the best possibly way to achieve her goals, right now. Larger businesses would benefit from this philosophy, constantly reviewing costs and existing relationships. It pays to shop around!
Next… Get paid first and foremost
Disclaimers: Any advice does not take into account your personal needs and financial circumstances and you should consider whether it is appropriate for you. ANZ recommends you read the Terms and Conditions and the Financial Services Guide (PDF 104kB) before acquiring the product.