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Five Cash Flow Management Strategies For Tech Entrepreneurs

via Forbes: In the world of startups, like most things in life, there is a mix of excitement and consternation in terms of getting off the ground. In order to transition from an idea to a successful startup, an entrepreneur must not only have the impressive technology but also a structured and focused plan that can constantly evolve and be refined with time.

A key part of my success plan was effective cash flow management. As a former founder of an energy efficiency technology startup, I greatly enjoyed demonstrating our technology to potential customers. I also dedicated an equal amount of time managing our company cash flow. Balancing cash flow with growth also enabled me to attain profitability at an accelerated pace. Here are five effective cash flow management strategies that enabled me to build a sustainable startup that was eventually acquired in early 2017.

1. Adopt A Routine

I made it a habit of running through the numbers and books daily. Whether I was sitting at an airport waiting to take off or just before signing off for the day, running through the books always kept me grounded. It was important to keep track of payables and receivables and be continually aware of potential stopgaps. It also helped to invest time in mastering QuickBooks, which is what I did in my early days. This enabled me to analyze cash flow information in greater detail to figure out what was working and where I needed to focus more of my skills and attention.

2. Forecast Stopgaps

One of the hardest tasks I encountered was to anticipate unforeseen expenses and situations. Through the eyes of an entrepreneur, I viewed the world as a place of unlimited opportunity, but as a businessman, I was acutely aware of the importance of preparing for the unforeseen. Anticipating and forecasting stopgaps helped build a more predictable cash-flow cycle, ultimately improving the company’s stability.

3. Unconventional Credit Lines

Another key strategy to your success could be to leverage your customers and vendors as creditors. During contract negotiations, we offered pricing incentives to our customers that enabled us to collect on balloon payments, ultimately boosting our cash reserves. At the same time, we worked with our vendors to create credit lines and favorable payment terms on just about anything possible, making it a key aspect of doing business while ensuring our quality was never jeopardized. This strategy greatly improved our chances of success.

4. Maintain Liquid Assets And A Cash Reserve

Every entrepreneur will encounter a period (or two) of financial challenges. This ultimately makes us better entrepreneurs. During these times, having a portion of your assets that can be quickly liquidated as well as maintaining a cash reserve can act as an insurance policy for your success. To do this, we would incentivize certain customers to make balloon payments for our products and services. This, in turn, would help us boost our cash position while strengthening our financials and presenting us as a viable candidate for outside investments and acquisition.

5. Find A Good Accountant/CFO

If your strengths lie in being a true salesman and you love being out in the field, then it will benefit you to bring in an experienced CFO or accountant to manage your cash flow and finances. Having a strong financial advisor early in the process will enable you to better manage your funds and avoid costly mistakes.

If you aim to be a successful technology entrepreneur who’s ready to bring disruption to your industry, the most important step you can take is to establish a simple daily routine and take a focused approach watching your cash flow. Disciplined cash flow management may not only potentially boost your personal confidence while managing growth, it could also improve investor confidence (and employee retention), further strengthening your position as a successful leader in the tech world.

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