Cash flow management – a few tips from Casper Ravn-Sørensen

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As a young entrepreneur that just has started working on your own startup, you are probably not thinking enough about the cash management. Maybe you are saving it for later, or you have a person that is responsible for it. That is okay, but do you really think that you shouldn’t make a plan yourself? After all, it is your business we are talking about!

What should you pay?

It is completely understandable that you are holding on to your business idea before everything else. Of course, you believe in your plan, and you are ready to work without earning as much since, after all, it is your dream you are living. You are passionate about your project and that is enough for you. Maybe for your team as well, if you are a group of people who are devoted to a certain goal. But cash flow is utterly important in today’s business world, and you have to realize that, without making a cash flow plan, the business will not work, and you are doomed for failure.

Making a plan for your own payments is just the beginning

  1. Incorporation fees
  2. Licenses and permits
  3. Construction and/or remodeling
  4. Possible deposit on rental agreement
  5. Marketing materials and other marketing related expenses
  6. Initial inventory and other supplies
  7. Equipment related payments

Those are all the things that you maybe still haven’t thought through, but they are all important when it comes handling your startup. You can, for starters, manage at least half of those expenses with a little help from your friends and family. For example, maybe you already have some office equipment you can use, someone in your team has a place for the office and you wouldn’t be obliged to pay the rent and deposit. Maybe you can handle all the marketing processes with little or no expenses. But all the licenses and permits, as well as incorporation fees, have to be paid as soon as possible. And you have to realize that paying taxes really is important because, if you forget paying the tax, you will end up paying more than approximated, and you would end up bankrupted. Maybe it seems impossible for you and your team, but you have to realize that those situations might threaten your business and the atmosphere in your team.

There is a positive attitude towards entrepreneurs, and it’s relatively easy to start your own company, and also to maintain it. The national authorities are working quickly and professionally. You handle everything online. Indeed, high taxes are a very big impediment for most of the entrepreneurs and lower their motivation to run a busines. But these are the rules, so you have to make it work either in Denmark or in any other country. My message to the government would be to invest more resources into entrepreneurs; to support ideas and start-ups more than they do now. Those young entrepreneurs, who will be supported by the government, will eventually create new work places, which will benefit any country they are working in directly. So, I believe there will be many advantages if the entrepreneurs will be more supported by the government. says Casper Ravn-Sørensen.

How should you manage your cash generated into the business?

There is also some cash you should get in the meantime. If you have already started your marketing procedure and handled pay-per-click and cost per impression methods, then you sure are getting some cash flow into your system. But it is obviously not enough. In order to get more money, you are to better your marketing and start contacting your customers-to-be, if you want them to be more active in the purchases. If you have done it, then you will have more cash flow into your company account. But what are all the methods and ways in which customers provide cash flow into your company?

  1. Actual sales of your product or service (projected sales)
  2. Asset sales
  3. Owner investments
  4. Investments from partners
  5. Accounts receivable (very important to keep an eye on)

Before starting anything, you and your team should presume how much you are able to sell. It is best that you do sales projections monthly since it is the best way to keep track of your business. In that way, you are able to really see and understand which part of the project is gaining the most cash flow and which part of the project you should work on developing.

How to improve receivables?

Sometimes, you will have some sort of a deal with companies or individuals. That deal will include those customers not having to pay for your product or service right away. But they have the freedom to decide when they will pay. You are the one giving them the deadline to do so. In that case, the best thing you can do is giving them a 30-days deadline but at the same time, giving them special benefits supposing they pay as soon as possible and before the deadline is finished. In that way, you will be able to get the money right away, and your projected sales per month will be as accurate as they can be. A few simple tricks can help you with making people pay a little faster than they know they should:

  1. Set up some bonuses, discounts or rewards for customers that are paying faster
  2. Maybe free-shipping expenses can be reduced for customers paying beforehand
  3. You can think of some kind of expenses/fees for customers that are late in payment (but after all, you should think about this one very carefully; you need your customers after all, your business depends on them, so a discount looks and sounds much better than a fee)
  4. Issue and follow up invoices regularly

The same thing you are doing, does someone from the other side as well. Let us take an example of some service you need to pay for your startup. You can easily check whether they offer some extra service if you pay the bill in advance. And you can decide whether it’s good for your business. Maybe you will have to wait for the next month to get it all done since, this month, your cash inflow doesn’t look so well overall. It is up to you in any case. You should just think about which service you can provide in order to make your customers question themselves about what they are to do.

How to improve payables?

Every part of cash management flow is about good organization. So, in order to improve your habits of paying the bills, you should organize yourself in the best way possible. Nowadays, you can make some payments automatic. So, when, for example, you get your bills for the office and your rent, you are able to set an exact date for every month when the money is withdrawn from your system. This is the main thing that should be handled during the month. But it’s not just about automation!

  1. Try and look for the discounts for early payments (you are doing the same thing from the other side, remember?)
  2. Set up a certain alert for the payment that needs to be done, and do not postpone it forever
  3. Think about what is the most important thing that should be paid for the month and organize it well with your team (if there are more persons handling the finances, there is a smaller risk for you to forget some payment or postpone it to an unknown period of time)
  4. You should be proactive with your vendors and suppliers, try and predict, in an annual plan, what your problem could be, and start working on that as early as you can

For more advises and guides, you can contact Casper Ravn-Sørensen on social media:

Blog
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Facebook
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And visit the other sites with projects he is enrolled in:

Investments
Quick loans
Beauty and health products

Read more about Casper Ravn-Sørensen in the Danish news:

Business

180grader.dk

Dagens.dk
DenkorteAvis.dk

Avisen.dk

Folkets.dk

Mandesager.dk

News.dk

Mx.dk

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