Better Cash Flow Management Can Save CPG Startups Right Now
Recently, Simple Startup shared key methods for CPG Startups to extend their cash runway with Colorado Biz Magazine. You can read a snapshot of these methods below and then head to Colorado Biz Magazine for the full article.
Tried and True Methods for Extending your Runway
In the olden days (just a few short months ago), the average company had less than 30 days of cash on hand. For nearly all companies today, especially those in the consumer packaged goods (CPG) space, having several weeks of financial runway now seems like a luxury.
For startups in the CPG space, having an updated cash flow management strategy could determine whether your business (and your larger network of partners and vendors) survives or not. And there’s a larger consideration here too: the likelihood that our economy can rebound has everything to do with ensuring that our businesses remain open.
Why is Cash Flow Management Important in CPG?
CPG is traditionally a low-margin, high-volume industry category. And, it’s a labor-intensive and operationally complex space, which helps explain why nearly one-third of startups in the CPG space fail because of a cash liquidity crisis. Most CPG entrepreneurs understand the basic concepts of a cash flow forecast yet struggle to incorporate it into their business strategy. The result? Shorter runways and less breathing room.
Get Your Cash Flow Plan in Place
A cash flow projection (also referred to as a cash flow forecast) is essentially a breakdown of expected receivables versus payables. It ultimately provides an overview of how much cash the business is expected to have on hand at the end of each month. Updating cash flow plans sounds a lot more daunting than it really is, and it’s one of the most important things any company can do right now.
With the right tools and training, these projections typically take less than an hour to produce but can go a long way in determining whether the business can survive the COVID-19 disruptions to sales and supply chains — and can help course-correct before it’s too late. With this forecast, business owners can immediately understand whether accounts receivable are lagging, how to speed customer payments, and even whether to renegotiate agreements with vendors and distributors.
To read the full article including all of our methods for keeping cash in your business and decrease cash leaving your business visit the originally posted article on www.cobizmag.com.