Most seasoned entrepreneurs will tell you that achieving long-term success is less about having a brilliant idea and more about your ability to consistently manage your cash flow. No matter how smart or hardworking a founding team may be, their efforts will be wasted if they are unable to secure the liquidity the business needs to cover operational expenses, seize growth opportunities, and weather financial challenges.
If you run a small- to medium-sized enterprise (SME) or a startup, this is probably a lesson you might have already heard. However, in the age of hype and fast money, it’s a valuable piece of wisdom that often gets left by the wayside, usually with serious consequences. In this article, we’ll look at several best practices that Philippine-based SMEs and startups need to implement to optimize their cash flow and ensure long-term success:
Choose a Trusted Small Business Banking Partner
Traditional commercial banking is more suited for traditional businesses. If you’re running an SME or startup, especially one that relies heavily on digital services, these conventional commercial banking services may not necessarily be the best choice for you. Chances are that you should, instead, turn to an all-digital financial institution to facilitate your online business banking needs.
For business banking, Philippines startups and SMEs have come to trust Maya and its innovative solutions. Putting your business’s savings in a Maya Business Deposit entitles you to high interest rates and gives you better fund visibility through the Maya Business Manager. Choosing Maya as your provider of SME business banking solutions also gives you access to a wide range of banking products and services specially designed for locally based startups and SMEs.
Track Your Cash Flow
Monitoring cash flow regularly allows you to understand the financial health of your business and helps you take proactive measures in case of impending financial difficulties. Being slow to track and monitor your inflows and outflows can be catastrophic since you will not have an accurate idea of how well your business is doing.
To stay on top of your business’s cash flow, familiarize yourself with the apps you need for business banking online. For even better visibility, ditch the free spreadsheet apps and invest in specialized enterprise resource management solutions to track your cash and inventory movements in real time. Doing these will help you categorize and analyze expenses so you’ll know where to reduce costs and how to optimize your revenues.
Know Your Break-Even Point
As the saying goes, "you have to spend money to make money." However, determining how much is too much has become more challenging, especially in the age of venture capital, when businesses may operate at a loss for extended periods before achieving profitability. Regardless of your business model, having a clear understanding of your break-even point is essential.
Your break-even point is the point at which your total sales match your total expenses. Knowing what it is is important for a few reasons. First, knowing your break-even point helps you set effective pricing strategies that can help your business gain market share or turn a profit. Second, it determines the minimum revenue goals you need to set in order to cover your business costs. Lastly, having this figure on hand can help you stay on track and avoid unnecessary expenses, particularly during the more volatile early days of your venture.
Prioritize Long-Term Customer Relationships Over One-Time Sales
It’s always better to lose a little money upfront to earn a loyal customer than it is to gain short-term profits and lose that customer forever. Building strong, long-term relationships with customers leads to repeat business and consistent revenue streams, both of which are necessary for business longevity. Moreover, loyal customers are more likely to recommend your products or services to others, increasing your customer base organically and reducing the cost of each sale.
To ensure a steadier income stream, focus on providing exceptional customer experiences and personalized services. Consider implementing loyalty programs, and actively seek feedback to understand your customers’ evolving needs. Over time, this approach should not only give you a better cash flow but it should also lead to higher customer retention rates and improved brand equity.
Have an Emergency Fund
Unexpected expenses and revenue fluctuations can occur at any time. Having an emergency fund gives you a safety net that ensures you can pay your employees and keep your operations going. Aim to build a fund equivalent to three to six months' worth of operating expenses to ensure sufficient coverage in times of uncertainty. If you have a Maya Business Deposit account and are a regular user of Maya Business solutions, you can also apply for a Flexi Loan to temporarily boost your cash flow.
Aim to Grow Sustainably, Not Quickly
Choosing rapid growth often involves borrowing heavily and ramping up your marketing and sales budget for short-term gains. While this can be a winning strategy, it can often lead to hasty decisions that expose your business to needless financial risk, particularly if your revenue falls short of your projections. On the other hand, choosing sustainable growth ensures that your financial resources are in close alignment with your pace of expansion, ultimately resulting in steadier cash flow.
To avoid burning out, try to develop a realistic growth strategy that considers your financial capabilities and market conditions. Avoid taking on excessive debt and make sure to reinvest enough earnings into revenue-generating activities and your emergency fund to maintain stability during periods of growth.
Optimize Your Cash Flow with Maya Business Deposit
As entrepreneurs, it's crucial to remember that while hard work and brilliant ideas are important, effective cash flow management is what sustains your business. By choosing Maya as your venture’s online business banking partner, you’ll enjoy full visibility and control of your business funding, putting you that much closer to achieving your startup or SME’s mission. Create a Maya Business account today to open a Maya Business Deposit account and access Maya’s innovative business solutions.
After creating your Maya Business account, sign up for the Maya 1-2-3 Grow bundle to further boost your cash flow. Save on QR Ph payment processing with a 1% MDR (merchant discount rate) for 3 months from promo onboarding. Designating your Maya Deposit account as your payment settlement account also gives you one extra month of 1% MDR on your QR Ph sales—that’s an extra month of boosted revenues. You’ll also qualify for a no-collateral Flexi Loan offer in only 3 months, giving your startup or SME up to PHP 2 million in additional funds for optimizing cash generation and covering emergencies. Achieve better cash flow today with Maya Business.
