Cash Flow Management Services Built for High-Growth Startups

Cash is king for any type of business, but it’s especially important for a startup. Startups are in survival mode as they enter the market and aim to find a good product-market fit, and their cash flow management strategies should reflect a goal of remaining solvent, compared to more traditional businesses, which can use their cash flow to optimize capital efficiency and drive further investment and stability. For startups, managing cash flow effectively is the foundation of survival and future growth.

As startups implement the right cash flow strategies, they can do more than just survive, but drive strategic business growth decisions — but it all starts with forming the right foundation. Graphite Financial is a full-service accounting services firm that specializes in working with startups in all types of industries. With a background in venture capital and a deep understanding of burn rates, cash runway management and other cash flow management techniques, we’ll partner with your startup to implement the right strategies to help it remain solvent in the early days and thrive as it matures.

Strategic Cash Flow Solutions That Scale With Your Startup

Graphite’s cash flow management services are comprehensive and designed to scale as your startup grows and evolves. As part of Graphite’s Fractional CFO offering, we focus on forecasting, analysis and strategic guidance to help your startup properly manage its liquidity and cash runway. Graphite’s full spectrum of services includes:

• Cash flow forecasting: We’ll work to produce short-term, medium-term and long-term cash flow forecasts to help your startup anticipate your cash flow and when cash needs may occur.
• Financial modeling: Our financial modeling capabilities can help your startup anticipate its cash runway and project burn to help facilitate better decision-making.
• Strategic guidance: Our Fractional CFO advisory services can help your startup with cash flow management, fundraising strategy and future planning.
• Bookkeeping: We’ll also help handle various day-to-day tasks, such as bookkeeping and daily monitoring.
• Financial reporting and analysis: We’ll take cash flow data and create robust reports to form our analysis, providing more than raw data for startup founders but also helping facilitate better overall decision-making.

What’s more, Graphite’s services are designed to scale with your startup as it grows. For instance, early-stage startups require different cash flow management strategies than more mature startups and those in later fundraising rounds. Good cash flow management is key to building stakeholder confidence and successful fundraising rounds.

Core Components of Startup Cash Flow Management

There are various key elements of effective cash flow management that startup founders should know. Proper forecasting and planning are among the most important, as it’s crucial for startup leaders to project anticipated cash inflows and outflows over the short and long term. These forecasts can help with future planning and fundraising. Implementing certain programs can also help give leaders real-time insight into their cash positioning.

Other key components of startup cash flow management include managing burn rate and extending cash runway between fundraising rounds. While burn rate can be managed by increasing inflows and decreasing outflows, various strategies can be implemented to extend the cash runway. Some include implementing stricter budgeting, negotiating for better terms with vendors and exploring alternative financing options.

13-Week Rolling Cash Flow Forecasting

Short-term cash flow forecasting is important for any type of startup, but especially for those in their early stages that have limited historical data to project long-term forecasts. A 13-week rolling forecast is best practice for detailing a startup’s cash position and for scenario tracking purposes. By providing short-term and real time cash visibility, startups can identify and address liquidity shortfalls, make better decisions, and build trust and confidence with stakeholders and investors.

Burn Rate Analysis and Optimization

Part of managing a startup is properly managing and working to extend its cash runway. This can be optimized via burn rate analysis and assessing gross burn versus net burn. Gross burn consists of your startup’s total monthly operating costs, while net burn is the amount of money your startup loses each month after accounting for revenue. By properly analyzing cash flow, you can create a strategic plan that optimizes burn rate without sacrificing growth. This can be done by working to maximize revenue per customer, improving efficiency and having more disciplined financial management.

Accounts Receivable and Revenue Collection

Accounts receivable (AR) help ensure your cash flow can cover expenses. Optimizing this can also help improve efficiency and build trust with investors. Some strategies for optimizing AR include building strong customer relationships, streamlining the invoicing and payment process, leveraging automation to handle repetitive tasks and accelerate workflows, and implementing and enforcing clear policies. Using a centralized, automated billing system can come in especially handy for SaaS startups and their unique, subscription-based business model, helping to streamline financial operations across teams.

Industry-Specific Cash Flow Management Approaches

Your startup’s cash flow management approach should largely be dictated by its industry and the various revenue models, operating costs and customer payment cycles associated with it. For instance, SaaS startups tend to have predictable, recurring revenue thanks to their subscription-based business model, while HealthTech startups tend to have longer and more complex billing cycles that may also involve insurance companies and government payers.

SaaS Cash Flow Dynamics

Thanks to their subscription-based business model, SaaS startups have unique cash flow dynamics. Key metrics such as MRR, ARR, and CAC payback are especially important. SaaS startups also manage monthly and annual billing, with each impacting cash positioning and revenue recognition. While annual billings create an immediate cash inflow and can help the startup’s cash positioning, monthly billings are also common.

If your SaaS startup is struggling with a negative cash inflow, some strategies to improve may include offering discounts for upfront payments, streamlining billing and accounting efficiency, reducing customer payment terms and negotiating supplier payment terms.

eComm and CPG Working Capital Management

One of the major cash flow management challenges with eComm startups is managing inventory. Having too much or too little on hand at any given time is bad for your cash flow, but eComm startups are also challenged with keeping inventory levels during seasonal peak periods and the holiday season. Inventory financing is one way eComm startups can receive the capital to purchase stock items, which can increase liquidity and improve profit margins.

eComm startups must also smartly navigate marketplace payout timing and multi-channel cash management. Good inventory accounting can help.

Technology Stack for Modern Cash Flow Management

As a leader in partnering with your startup on advanced cash flow management solutions, we’ll introduce the right technological infrastructure to help with cash flow tracking. Our programs include AI-powered forecasting tools that can easily integrate with APIs and other payment platforms and offer dashboards to showcase cash flow data in real time. We’ll also ensure your bank accounts are fully connected within these systems, giving you accurate, real-time visibility into liquidity.

Cash Flow Crisis Prevention and Management

All startups are bound to experience cash flow challenges from time to time. However, if you prioritize cash flow management, you can take a more proactive approach to handling these challenges as they arise. Good cash flow management can include warning indicators and trigger points to spur action to conserve cash and address potential cash flow gaps before they impact operations.

Some ways to accelerate cash inflow, reduce burn and conserve capital include:

• Expediting accounts receivable to create an inflow of cash.
• Perform an expense audit and limit spending on non-essentials.
• Reduce marketing spending.
• Tapping into any cash reserves to act as a buffer.

Bridge financing presents another option. Bridge loans, convertible notes, revenue-based financing and venture debt are all temporary funding solutions that can help act as a financing stopgap between fundraising rounds or cash influxes. Your startup might also work to negotiate better payment terms and payment timing with vendors and partners.

Integration With Fundraising and Growth Planning

Good cash flow management is about more than liquidity and survival for startups; it can also relate to broader strategic objectives, like fundraising and growth planning. Strong forecasting and reporting provide a clear picture of your startup’s overall financial health, helping founders communicate progress to investors and align resources with long-term goals. Good cash flow forecasts can help support fundraising narratives and tell a story about your startup. They can also help support milestone-based planning and investor reporting, creating a more tangible link between financial resources and startup progress. Milestone-based cash planning can also improve financial control, increase capital efficiency and provide a more structured roadmap for the future.

Cash flow management helps with investor reporting by relaying key metrics, tracking progress on milestones, and communicating challenges and solutions.

Partner With Graphite Financial for Strategic Cash Flow Management

For more information on the benefits of cash flow management services and how they can help take your startup to new heights, contact Graphite Financial today. As a full-service accounting firm that specializes in partnering with startups, we aim to serve as a true extension of your startup to meet its financial goals. We can help provide financial forecasting, reporting analysis and strategic advisory to ensure your startup is poised for growth and long-term financial success. Contact us today for more information and to schedule a consultation.

Frequently Asked Questions

How do cash flow management services differ for startups versus established businesses?

The main goal for startups is to stay solvent. That said, startups tend to focus on building a positive cash flow and extending their cash runway with the limited resources they often begin with. More established businesses and finance teams work to optimize capital efficiency and use cash flow to drive further investment and stability.

What’s included in Graphite’s cash flow management service package?

Graphite’s cash flow management service is included in its Fractional CFO offerings. When startups work with a Graphite expert, they can expect financial forecasting, reporting analysis and strategic advisory services as part of this broader financial management offering. Contact Graphite today to learn more about our cash flow management services and how you can future proof your company.

How far in advance should startups forecast their cash flows?

Startups should strive to create short-term, medium-term and long-term forecasts; however, the appropriate forecast depends on various factors, notably your startup’s stage. For instance, due to limited historical data, early-stage startups may be challenged in creating medium- and long-term financial forecasts. However, all startups should minimally have a rolling, 13-week short-term forecast. It’s also important for startups to routinely update their forecasts based on performance, changes in market conditions and other factors.

What are the key cash flow metrics investors look for in startups?

Investors look for several key real time cash flow metrics when deciding to invest in your startup. Some of these key metrics include burn rate, cash runway, CAC, LTV, MRR, ARR and gross profit margin. These metrics all help an investor determine how well a startup is acquiring and retaining its customers, how long it can function with its current funds, and its long-term success and scalability.

How do you handle multi-entity or international cash flow management?

Multi-entity or international cash flow management is all about selecting the right platform to support this initiative. The right ERP or accounting software can pay dividends in streamlining your startup’s processes and workflows, helping you standardize your chart of accounts, automate transactions and develop the right internal controls pertaining to currency management.

When should a startup consider outsourcing cash flow management services?

There are several instances where it makes sense for a startup to outsource its cash flow management services. These include when your startup is experiencing rapid growth, facing significant cash flow challenges, lacking the expertise to handle complex financial management, or gearing up for fundraising rounds or expansion. Outsourcing cash flow management services presents a cost savings compared to hiring a full-time in-house professional, and working with the right partner ensures you’re still receiving expert service.

How does cash flow management integrate with our existing accounting systems?

Cash flow management integrates with accounting systems via automation and data synchronization to create a single, unified financial view. When this integration is coordinated properly, startups should be able to monitor their cash flow in real-time, helping enable accurate forecasting and streamline various tasks, like invoicing and payment processing.

What’s the typical ROI of professional cash flow management for startups?

While it’s hard to determine a monetary return on investment, the true value of professional cash flow management lies more in the value of avoiding common cash flow problems and improving your startup’s operational efficiency. It’s estimated that more than 80 percent of businesses fail due to cash flow problems, underscoring the importance of a robust strategy.