3 Cash Flow Tips for Fintech Startups: How to Support Your Finance Team and Foster Growth

Small Business
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Startups of all stripes struggle with cash flow. Even fintech startups can fall into common financing traps such as overspending, lack of oversight, and poor support for their accounting team.

As it stands, up to 75% of venture-backed startups shut their doors within their first year. Negative cash flow issues are one of the top reasons these businesses fail.

To learn more about successful fintech startup cash flow management, we spoke with Thejo Kote, founder of Airbase, to understand how entrepreneurs can better manage cash flow. A serial entrepreneur, Thejo has successfully started, scaled, and sold companies, including Automatic, which was acquired by SiriusXM for $115M in 2016.

In this discussion (check out the video—it’s a great conversation about his experiences in the industry), Thejo offered up insights on cash flow that we’ve narrowed down to three major tips for fintech startups:

1. Prioritize Accounting as More Than Crunching Numbers

Businesses can’t do anything without capital. Unfortunately, it’s common for businesses to unintentionally handicap their accounting team. This can sabotage their business and result in inaccurate finance reports. Often, finance professionals are burdened with manual tasks, like data entry. Poor reporting or communication across departments can slow and confuse cash flow reporting.

“Unfortunately, finance and accounting teams tend to get pushed into a role of glorified data entry people during the first week of every month—largely because of a failure of the tools they are expected to use,” says Thejo.

When this happens, your accounting team wastes time and energy on tasks that don’t further business objectives. And because they lack visibility about finances and how they relate to the company and department goals, cash flow projection becomes difficult, if not impossible.

In this kind of situation, it’s highly likely that your business is leaking money—but you don’t even realize it. This leaves less to spend for growth.

Give them access to tools that give them back time and allow them to forecast cash flow without hassle.

2. Increase Visibility for Startup Success

From the very beginning, it’s critical that startups lay the foundation for a solid and scalable accounting process. A part of this is determining rules around business expenses, budgets, and picking the right financial tools that allow for collaboration.

While Google Sheets may work for a small, budding business, it’s often not a good long-term strategy, especially if you’re scaling quickly. Not only do you need to manually update the sheet regularly, but it has limited project and reporting capabilities. Furthermore, it can get overloaded and confused quickly when multiple employees are working on the document.

When it comes to selecting the best cash flow management platform, you need to focus on a solution that provides usability, visibility, transparency, and collaboration.

“If you put in place a system which allows every individual to ask and answer the questions of how they are spending company money and how much they are spending, then it is so much easier to create a culture of accountability and hold on to more cash,” says Thejo.

Not only should you be able to quickly adjust your income or expenses, but you should also be able to:

  • Add recurring events

  • Adjust past transactions

  • Write in additional details to transactions

  • Model different scenarios

Thejo explains that without the proper tools your accounting team will end up focused on oversight, fixing errors, and scrambling to find out why money is being spent.

Reassessing Cash Flow As You Grow

It’s important to keep in mind that your cash flow management needs can change once you become more established and your company grows. Even with a solid foundation, you may need to update your technology.

At this point, you’ll need to decide when to prioritize a migration to a new cash flow management program. If you are scaling rapidly, it makes sense to migrate away from silos and automate more tasks as soon as possible.

3. Create Transparency for Better Forecasting

    Tracking income in and out is foundational, but using that data to create cash flow projections is where a startup can up their chances of survival. Forecasting allows you to understand your cash flow further in the future and can help you make decisions—such as when to invest in new equipment or seek funding.

    You’ll want to ask yourself a number of questions as you review your cash flow reports. Thejo recommends these key considerations:

    • What are the levers that highlight growth?

    • How can we get the necessary new bookings in a certain amount of time?

    • Why do we think we can do that?

    • What inputs need to go in for sales hiring, marketing spend, and so on for us to meet our objective?

    Clear and detailed cash flow reports make answering these questions easier. And the transparency will help you better forecast your future cash flow.

    More on Cash Flow for Fintech Startups

    These are just three of the many insights from our interview with Thejo. As you can imagine, the fast-paced landscape of fintech changes rapidly. His advice is to support your finance team, choose tools that provide visibility, and foster transparency when it comes to cash flow management, even as the tech available to do so evolves over time.

    We’d like to thank him for his detailed breakdown and for sharing his experiences in fintech. You can watch the full interview on this page or over on YouTube.

    Try a New Approach to Cash Flow Management

    No matter what stage your fintech startup is in, understanding your cash flow is critical if you want to succeed in the long term. Cash flow projections, detailed reports, and intuitive visualization are great ways to support your accounting team and foster growth, so look for software that easily creates these reports. Get started by trying Pulse free for 30 days and take control of your business.