Building a sustainable business calls for effective cash management solutions. Over 82% of small- and medium-sized startups fail due to poor cash management services.
A proper cash management solution ensures your business has enough to meet its financial obligations. Moreover, it allows the company to invest in growth opportunities and remain solvent long-term.
Consistent and strategic cash management solutions let you position your business to meet unexpected challenges and harness new opportunities.
This post breaks down finding cash management solutions that work with you to grow your business.
Cash Management Solutions are Crucial for Success
Effective cash management solutions help you build a financial roadmap that leads you to sustainable growth. You can focus on opportunities that drive growth by ensuring consistent cash flow. Proper cash management solutions can bring quite a few benefits.
Improved Cash Flow Forecasting
A cash flow forecast projects the amount of money coming in and going out of a business over time. A good cash management solution helps identify potential cash shortages while taking proactive steps to ensure consistent cash flow.
Continuous cash management ensures the cash flow forecast is regularly updated to reflect the current situation.
Enhanced Liquidity Management
Like cash management, liquidity management involves assessing whether the business has enough liquid resources to meet its immediate financial commitments. It also can help increase profitability and weather any unexpected changes in the business environment. This resilience empowers businesses to control liquidity while reducing unforeseen risks.
Reduced Financial Risks
A cash management strategy employs planning and prevention to reduce financial risks. All of the following play a role in reducing business-related risks:
- Keeping current cash forecasts
- Managing debt repayments
- Monitoring AR and accounts payable balances
- Concentrating on currency exchange and interest rates
The cash flow statement is vital to a sound cash management system. The report outlines all cash in- and outflows to reveal all available money at any given time.
All this information gives business owners better decision-making tools to utilize and allocate resources within the business properly. Further, robust cash control helps you make informed decisions on new opportunities and revenue streams.
Common Cash Management Issues
Whether due to inexperience or simply part of the game, startups commonly need help with cash management issues. Naturally, you can only focus on solutions after you know to watch out for these common problems.
Cash Flow Gaps and Unpredictability
Cash flow gaps refer to discrepancies between cash inflow and outflow. These gaps often result from delayed customer payments, seasonal revenue variations, or long lead times. Unpredictable financial markets and consumer sentiment make the situation more challenging to navigate.
Fortunately, improved cash flow forecasting can help address these gaps and unpredictability.
Inefficient Cash-Handling Processes
Cash handling for startups and other small businesses can be cumbersome and manual, often leading to entry errors and wasted time. It can take hours to sort, count, and file transactions and the process is susceptible to mistakes with miscounts.
Further, an inefficient cash handling process means longer customer waiting times, leading to frustrations.
Lack Of Real-Time Visibility Into Cash Position
Most startups would benefit from real-time visibility of their cash position and access to up-to-date information about available funds. This lack of visibility makes informed assessments of cash flow opportunities or risks difficult.
Types of Cash Management Solutions
Fortunately, startups have multiple options for managing their cash.
Banking tools and services
Many modern online banking platforms have advanced features like bill payments, e-statements, mobile check deposits, and streamlined daily financial operations.
These online services frequently allow cash pooling from multiple sources so that you can disburse it efficiently.
Cash flow forecasting software
Some providers offer specialized software for cash flow forecasting to accompany your ERP system and other cloud-based accounting tools. They might provide customized reports based on historical data and algorithms to make precise cash projections.
Treasury management systems
Implementing these specialized software applications can help automate processes for managing your startup’s financial operations.
Merchant services and payment processing
Of course, like with many aspects of modern business, you might be interested in all-in-one payment processing services. They simplify how startups collect and process payments for better cash flow management.
Two Must-Haves for Cash Management
Whichever solution you choose for your startup’s cash management must offer real-time visibility and forecasting.
Real-Time Cash Visibility
Real-time cash tracking is an essential aspect of cash management. It enables a startup to understand its cash position up to the minute and make informed financial decisions. There are new tools for tracking inflows and outflows while notifying you of important events or changes to your account balances. This visibility allows you to respond quickly to avoid any potential problems.
Cash Flow Forecasting
Cash flow planning requires you to see into the future and accurately forecast your future cash needs. Forecasting and scenario modeling will help you ensure liquidity and resilience.
Seek Expert Advice for the Right Cash Management Solutions
The next step in unlocking your business potential lies in finding an expert to support your cash management.
At Founder’s, we understand the importance of stable cash management so that you can focus on maximizing revenue and profits. Our experts can help you bring reliability and dependability to your startup’s cash management. Contact us today to get started.