Cash is the lifeblood of every business.
For startups, especially, cash is what keeps the engine running. How many startups do we know that have folded because they’ve run out of cash?
But having the cash is not enough. A startup can raise huge funding rounds, generate plenty of revenue, and develop the most innovative product, but if they don’t have a handle on their finances and cash flow, they will find it challenging to see the big picture and make accurate, informed business decisions.
This naturally makes effective cash flow management a key driver of business success. A challenge, yes, even for startups that are just starting out – but very important to make sure there’s no trouble down the line.
Tracking cash flow can be as simple as creating a spreadsheet and manually tracking them. But businesses need more than just tracking; tracking the cashflow is just the first step to effective management. And, as the business grows, this could be quite time-consuming. Startup founders have a lot on their plate – cash flow, while important, is not the only thing a founder has to do.
Digitalising cashflow management, then, should be a focus. Apart from better security, easier accessibility, and the removal of human error in the equation, going digital gives companies these benefits:
Greater control over day-to-day business
A digitalised cash flow management system gives companies more control over the day-to-day finances of their business. Having a cloud accounting platform, for example, gives companies better financial visibility. And with the acceleration of banking innovation, startups can use secure bank integrations to enable the flow of real-time data from their banks.
This gives founders a clear view of the business’ financial position to make more informed decisions. They can also share this view with their advisors who can offer more strategic advice to them as they scale.
Shorten the cash flow cycle
One of the key operational challenges faced by startups is late payments. By leveraging technology to integrate their accounting platform with payment gateways, founders can easily monitor payment status, automate the invoicing function, and send reminders.
According to the global small business platform Xero’s recent survey, small businesses that use their platform are able to shorten the number of days in between invoicing and getting paid from 42 days to 32 days in Hong Kong, and from 43 to 30 days in Singapore. The cash flow cycle is significantly shorter for Xero customers compared to other small businesses (6 per cent late payment vs 24 per cent). The cash flow gap is effectively being plugged for small businesses that use Xero.
Increase productivity and decrease cost
By going digital, startups will also be able to save money by reducing manpower, software and hardware costs, and employee time spent on manual tasks.
Employees will be able to automate tasks and even connect different apps and documents to their accounting platform. For example, the integration of the bank feed with a cloud accounting platform such as Xero allows for automated banking reconciliation. In addition to that, startups can capitalise on a growing app ecosystem to support their diversified business needs ranging from CRM to HRM.
Digitalising is key to running a ‘beautiful business‘
Startup founders who embark on the path of entrepreneurship do so because they have a passion to run beautiful businesses. By leveraging technology, they will be able to free up time to focus on the aspects of the business that they are truly passionate about, like product development, sales, and driving sustainable business growth.
In a highly competitive economic environment, technology is no longer a good-to-have, but rather a have-to-have.
Digitalisation has been identified as a means to increase productivity, decrease operational costs, and improve business agility and transparency. Most importantly, it gives entrepreneurs greater control.
But digitalisation still takes a back seat as entrepreneurs focus on what may seem like more pressing matters such as business expansion, day-to-day operations, and keeping up a healthy profit and loss. The irony is that digitalisation helps smaller players make the most of their nimbleness, increase innovation and productivity, and lower expenditure to take on industry giants.
On Monday, 26 November, Xero and e27 will be bringing together some of the most innovative founders who will share about their startup journey, key challenges and some tips on how to focus on the big picture and run a more beautiful business.
Sign up today to secure your seat. See you there!
Disclosure: This article is produced by e27 content marketing team, sponsored by Xero