Cash is the Lifeblood of Any Business
Cash is the Lifeblood of any Business
Cash is the lifeblood of any business but especially for startups. It is not just about how much money is in the bank today, it is about how much you will have in three weeks when payroll hits, or that large annual vendor invoice is due. Without clarity on cash flow, companies can make misinformed decisions that risk everything they have built.
In this post, we will walk through why cash flow is so critical for early-stage companies and how you can take control of it with a few simple steps.
Why Cash Flow Management Matters
When people think of finance teams “managing cash flow”, cost-cutting is the first thing that comes to mind but managing your cash flow and understanding your cash position is not just about reducing expenses. It may lead to identifying overspend or duplicative costs, but in reality it is about knowing your current and future position so that you and your leaders can invest your capital most effectively.
Most startups fail due to cash mismanagement, not lack of product-market fit.
Cash flow visibility allows leaders to make smarter decisions around hiring, marketing, vendor payments and fundraising timelines.
Even profitable businesses can run out of cash if timing is not well managed.
Common Pitfalls We See
When working with startups there are a few common pitfalls we see. No companies are spared from needing to manage cash flow but it is especially important in early stage startups where the infrastructure may not be in place. Some common pitfalls include:
Relying solely on bank balance without projecting future outflows
Lack of separation between operating cash flow and financing activities
Ignoring the timing of receivables vs. payables
Overhiring based on false confidence in current cash
What You Need: The 13 Week Cash Flow Forecast
A rolling cash flow forecast is crucial to help manage all of the moving pieces. While annual planning may be best practice, a 13 week cash flow forecast may be the perfect fit for companies in the early days without much visibility into what the next 12-18 months may look like.
Why this timeframe works? It is enough time to identify short-term issues without over complicating the process. Your inputs are beginning balance, expected inflows, known outflows and planned spending to get to the output of a week-by-week view of net cash and ending balance.
This gives you time to adjust and accelerate investment into things that are working and driving growth, to cut costs on things that are not working, delay expenses, speed up collections or start fundraising earlier.
Cash Management Best Practices
Once you have a model in place, starting to build the forecasting muscle early will help to ensure that you are developing the right discipline and values early on in your journey. Some best practices include:
Building a weekly cash flow ritual
Aligning finance and ops to plan spending in advance
Monitoring actuals vs. forecast and course correct
Communicating openly with your team about financial expectations
Excelerate’s Role
At Excelerate, we provide fractional Finance and HR leadership for early-stage startups. We help founders build the operational foundation for scale without the cost of full-time executives.
As Co-Founder and a Fractional Chief Finance Officer I work with early stage teams to gain visibility, build discipline and make better decisions through strategic finance. Some of the things we can do to help are:
Setting up tools and processes that founders can maintain
Ensuring cash flow connects with broader business goals (growth, margin, runway)
Translating data into strategy
You do not need a full time Finance team to do this well.
Let’s Talk
If you don’t have a rolling 13 week cash flow forecast today, start now. It is one of the highest ROI activities a founder can do.
If you need help getting there, that is exactly what we do at Excelerate. Let’s talk, even if it is just to benchmark where you stand today. Reach us at hello@excelerate.work and check out our website, www.excelerate.work.