When your cash reserve runs dry, everything comes to a standstill until you figure out how much you're making and where you're spending it. Unless you're losing money because of fraud, your money isn't disappearing. You're making or collecting little, but you have many expenses.
That's why you need cash management guides fast, and we've done the work and created a list of the best cash management strategies for SaaS startups like yours. Read on!
outsource the process to an accounting firm and automate as many tasks as possible.
The data might show you when most customers opt out of your services, and that's where you should focus your customer retention strategy, such as communicating with them more often to build a relationship. The problem might also arise due to customer dissatisfaction, and you can turn this around by offering support or educational materials related to your products and services.
Further, since some customers will eventually leave despite what you do to retain them, focus your energy on the ones who stay and listen to them.
This is one of the best practices for accepting online payments that you need to implement, as it makes things convenient for the customer, as well as for your accounts team.
If you invoice customers regularly and you're still experiencing poor cash flow, consider decreasing the days payable when invoicing. You can also offer discounted rates to customers who pay early.
Another strategy is automating pre-authorized recurring payments. It works for many companies, whether a SaaS startup or a lender offering a personal loan with fast approval . The autopay process lets you deduct money from the customer's credit card on a specific day every month. You can even target your customer's payday to be sure the account isn't empty.
Your startup can also decentralize collections to save time taken to process payments. Once the payment centers distributed across the region receive money, they send it to a central office.
However, don't depend on this document only for financial analysis because many external circumstances affect the inflows and outflows. For instance, when your company buys an asset, the cash flow statement might show you overspent compared to what you made. Additionally, you might assume your company has money, yet it's because you owe many suppliers.
8. Focus on Cash Flow Forecasting
The process uses data you already have, such as sales, payroll, and expenses. It also forecasts cash from existing, new, and renewal customers, and an accurate forecast tells you which business aspects need more money or where to reduce expenditure.
On top of that, you can use the cash flow forecast to plan for the unexpected using what-if scenarios. Since SaaS companies treat software as a service, it's easier to forecast your cash flow as it's a subscription-based model.
Previously, a software company would multiply the expected sales by the selling price to forecast its cash flow. Now, you have a consistent monthly subscription rate seen in real-time.
The disadvantage of this business model is the data to use when forecasting. You may get inaccurate figures because of errors in spreadsheets or missing information unless you integrate your systems to gather data automatically rather than manually.
Also, maybe, your company only needs a few changes to its staffing policy to cut back on your payroll expense and other overheads. If that's the case, consider outsourcing services that a part-time employee can handle.
