522: How to Improve Cashflow During a Crisis

in today’s episode of the startup chat, Steli and Hiten talk about how to improve cash flow during a crisis.

One of the effects of the COVID-19 pandemic is that a lot of businesses are going to have problems with their cash flow. This could be as a result of customer cancellations or non-payments, and how you manage your cashflow in this crisis could make or break your business.

In today’s episode, Steli and Hiten talk about what cash flow management is, some things you could do to improve your cash flow, how to manage your cash flow during the crisis and much more.

Time Stamped Show Notes:

00:00 About today’s topic.

00:31 Why this topic was chosen.

01:35 Some things you could do to improve your cashflow.

03:54 Why you should talk to a finance expert if you want to learn how to read your P&L statement.

04:17 Why you should look at your P&L statement on regularly.

05:38 Why it’s important to know how much money your company is burning and how much is in the bank.

07:00 The number one thing to understand about cash flow.

07:50 How to manage your cash flow during the crisis.

09:26 How prepayments can help you with your cash flow.

12:08 How cash flow management is a never-ending process.

3 Key Points:

• Learn how to read a profit and loss statement.
• Talk to a finance person.
• Understanding how to read a profit and loss statement is something founders need to know.

[0:00:00]

Steli Efti: Hey everybody, this is Steli Efti.

[0:00:03]

Hiten Shah: And this is Hiten Shah. And I’m going to let you say it, Steli.

[0:00:06]

Steli Efti: Cash is King.

[0:00:08]

Hiten Shah: Yes. So, that’s what we’re going to talk about on the startup chat today. And yeah. Wow. That statement is more true than ever.

[0:00:20]

Steli Efti: Never is cash more king during a crisis, right? I mean, it’s always king, but during difficult times, even more so. So, we thought it might be useful for us to just share a couple of things that we have either done ourselves with our businesses or have seen others do successful during these times in order to improve their cash positions, to improve their cashflow, to just strengthen their companies and their startups to financially be able to make it through whatever rough waters we still have ahead of us, right? So for you, if I come to you Hiten and I’m like, “Hey, I have a startup. We have revenue, we have customers, we have costs. We need to improve our cashflow position.” What are the go-to tips that you would give? I know that this is, every case is different, but in general, what’s some of the things that you’ve seen people do, or you’ve done yourselves with your companies that can make a big difference during these times on improving cashflow.

[0:01:21]

Hiten Shah: Yeah. I mean, Oh God. The reason I say that is, sorry God, but is… Wow. There are founders and business people out there that have said they get confused when they look at a P&L, a profit and loss statement.

[0:01:48]

Steli Efti: Mm-hmm (affirmative).

[0:01:50]

Hiten Shah: So, step one, stop saying that. It’s not a tool you need, you just need to go spend the time, get your P&L for dummies book or whatever, and learn how to read a P&L. It is not hard. Full stop. Period. I could teach my ten-year-old how to read a P&L if I needed to. And so, I know I’m getting a little serious about this shit, but man, I get so frustrated when I hear someone tell me that they’re a business person, they