Managing the ebb and flow of money is a delicate dance for all entrepreneurs, no matter what stage.

Terryanne Chebet, who started the organic skin line Keyara Organics with her own savings, says her biggest challenge now is cash flow. “I started small and I am beginning to realize I should jump in and get funding to enable the business scale to the heights I dream of,” she says. Likewise, Ann-Marie Fleming of Dog Quality, a maker of senior dog products, describes cash flow as a struggle. “Our sales continue to grow faster than we can support, leading to constant inventory shortages,” she says. “While we have been able to use our sales to fund our productions, it takes time to build up the funds to cover all of our costs.”

For this special “Secrets of Growth” series, we’ve assembled an impressive group of entrepreneurs and small-business experts to share their best advice for building a successful startup. Here’s how they answered the following question.

What are some basic cash flow management tips for new business owners?

TSE_Jerry-L-Mills_150x150I recommend having at least three months of cash reserves. Let’s say that a company’s monthly overhead in expenses is $30,000. This company should have at least $90,000 in cash reserves. One should also avoid the temptation to use cash reserves to pay for purchases of equipment, autos, etc. Those items should be purchased with a bank loan or a lease with the purpose of maintaining a cash reserve. Every business will have that “rainy day” and cash reserves are critical to a company’s success.

Jerry MillsB2B CFO, follow at @jerrylmills

TSE_Laura-Zander_150x150We’ve taken the old fashioned approach to funding our business and our growth: If we can’t pay cash for it, we don’t buy it! We use “open to buy” for our inventory and try to budget for the other expenses. While there are certainly times in which that approach has limited our growth (or put us in a bad cash spot), we’ve discovered that — over time — it’s the right approach for us. We like the strategy so much that talked to about it; read more here.

Laura Zander, Jimmy Beans Wool, follow at @jimmybeanswool

TSE_Sarah-Kunst_150x150The number one killer of businesses is running out of money. Start out by keeping a close eye on your cash. Use services like when you are still using your own credit card and graduate to small business accounting software as you grow or incorporate. Quora has some good suggestions here for cloud-based services. There are tools to track expenses, manage your payroll, keep your books —, — and pretty much any business function you do. The next step is making sure you are maximizing your funding and cash flow options. Startups like Bond Street and Kabbage provide loans and factoring to help you bridge the revenue you are owed and the time it takes to get paid.

Sarah KunstFortis, follow at @sarahkunst

TSE_Nell-Merlino_150x150Make friends with a local community banker as soon as you are even thinking about starting a business — that is, before you need the money. Know exactly how much you need to grow your business, and don’t skimp. Make sure your cash flow documents and dynamic budgets are updated regularly with all the people involved in the production, distribution and sale of your product. Enter competitions like MSNBC’s “Know Your Value” with Mika Brzezinski where you could win $10,000 to grow your business. Get use to talking about money in a positive way so that you can raise a round of funding from friends and family to keep up with orders and make them part of your winning team.

Nell MerlinoPersonal BlackBox, follow at @nellmerlino

TSE_Divya-Gugnani_150x150The key to managing cash flow is doing your best to forecast your revenue and expenses. Whatever you think your revenue will be, assume it will be less and whatever you think your expenses are, assume they will be more. This way you have a worst-case plan for managing your cash.

Some more tips: Try to have customers pay on time or early — ecommerce is a great way to get people to pay upfront before you ship them products. For other businesses, figure out how you can take payments or deposits upfront for customers and potentially offer them preferential pricing to do this. But take note: Don’t lock up your business so it’s dependent on a few key customers. Diversity of your customer base is critical for managing cash flow. If you are reliant on a few customers and one or more have financial trouble, they can take you down with them.

A few last thoughts: Bill people promptly and follow up relentlessly. When it comes to payables, try to get credit and payment terms wherever you can. When doing your forecast, think about whether you want to raise capital or take loans to meet your needs. Always keep your fundraising relationships warm and stay in touch (even when you are not fundraising). You never know when you will need capital in a pinch!

Divya GugnaniConcept to Co., follow at @dgugnani

TSE_Lori-Horberman_150x150E-commerce has made inventory-based businesses much cheaper and more efficient to launch. With little need for a retail location, costs can be kept to a minimum until you know the popularity of the product and the market needs. As with any startup, you should bootstrap your businesses for as long as possible — thus creating value and potentially simplifying the fund-raising process. Inventory-based businesses, however, are challenging — unless you have pretty deep pockets, you’re going to need outside money very quickly. If you’re fortunate enough to have wealthy friends and families AND you can sleep at night taking money from them, they’re the right place from which to raise initial capital. If you’re not in a rush, check out Small Business Administration loans and local economic development incentives — there may be some for women-owned businesses. Crowdfunding might also be an option. A Kickstarter or Indiegogo campaign around a product could help boost publicity (and sales). As your products become more popular, the funding options increase — there are short-term loans and creative inventory and contract financing options if you are willing to guaranty the loan and/or use the inventory as security. And once you’ve really proven your model, there is venture capital.

Lori HobermanHoberman Law Group, follow at @lorihoberman


Everyone in business knows that “cash is king.” That means cash flow is the blood that keeps the heart of your business pumping. Here are a few basic tips for analyzing and managing your cash flow. First, secure a loan, such as a revolving credit line or equity loan, before you need it, so it’s available in case of short-term cash flow problems. Next, increase your cash flow by offering price discounts to customers who pay early. Tighten credit requirements, if you extend credit to customers … determine which ones can pay their bills on time, and figure out which ones are growing or struggling. And lastly, collect your receivables ASAP. Keep net 30 and net 60 terms in contracts to a minimum. Have someone assigned to keep a close eye on receivables and contacting clients periodically to collect payment. A nice nudge and persistence call from your company will help.

Julio Melara,, follow at @julio_melara