Back December 21, 2016

Cash Flow Motivation

If you are not a financial data aficionado, cash flow management may seem to you as yet another headache. Just like many not fun, but rather beneficial things in life (like going to the gym or jogging), to keep an eye on your small business’ cash flow is something you wouldn’t want to skip.

Think about it as a “healthy” habit; you don’t have to love it, just to get yourself motivated into adopting it. So how do you find motivation to keep track of the company’s cash flow?

There are two approaches – the basic principles of motivation, in fact:

 

Reward

Many people get motivated to get things done from the perspective of the final gratification. It is a strong motivator and can very well be applied to cash flow management. Think about what you may obtain if you take control of the company’s cash movements and succeed in forecasting it accurately.

First of all, you may obtain an important cash reserve to be used for further investments. Think about the new projects you dream to work at or the new equipment and software you’ve wanted to get your hands on for so long. If cash flow is well administrated, you are very likely to achieve your investment goals.

Another “reward” to consider is an important round of financing for your startup. It is no secret that investors look attentively at the cash flow statement to understand if you are able to manage their money in a good, sensible way.

Also, think about succeeding with an important sale; if you don’t want to lower the price, you can offer instead a longer payment term. It may be the argument your prospect needs to say yes to the deal. For that, though, make sure your cash flow allows such a delayed payment term.

 

To avoid pain

The other strong motivator that drives people into adopting uncomfortable habits is to avoid even stronger distress.

Any entrepreneur’s pain is the fear of bankruptcy. Running out of cash is number 2 reason for which startups fail. You draw the conclusion. Following the saying “better safe than sorry”, managing the cash flow in time is one important step to staying out of the “going bankrupt” club. This is a worst-case scenario, of course, though a very realistic one.

Another pain is to wake up one morning and realize you don’t have the money to pay salaries and/or suppliers (which, if not handled properly, may very fast lead to going out of business); at least not for a while. Wouldn’t it be great if you had some cash reserve to make these stringent payments until your clients pay their debt to you? Wouldn’t you sleep much better if you didn’t have this issue burdening your mind? Here’s your motivator!

 

Think about cash flow forecast and management as your routine to keep the business “fit”. Chances are you won’t enjoy the process itself, but you will surely enjoy how you feel as an effect: relieved, less stressed, more confident, inspired. You can also try our ThinkOut platform, to get more comfortable with the whole process.