How to manage cash flow before you scale

Growing a business costs money. If you spend too much too fast, you can run out, even if your business is making a profit.

At this stage of your startup journey, you have staff to pay, investors to keep happy, and a product to sell. So if you don’t manage your money carefully, you can suddenly find yourself unable to pay the bills.

Many startups assume they'll get more funding just in time, but markets change, investors back out, and suddenly they’re stuck.

This guide will help you avoid that trap. You’ll learn how to check where your money is going, plan ahead, get paid faster, cut costs without hurting growth, and save enough so you’re never caught short.

Part 1: How to understand your cash flow

Cash flow is the real test of your startup’s financial health. You can have a profitable business on paper and still fail if you don’t have enough cash to cover expenses.

Here’s how cash flow works, why even fast-growing businesses can struggle with money, and how to check for risks before they become big problems.

1a. Know these cash flow metrics

It can be easy to assume that if your business is profitable, you’re financially safe. But profit and cash flow aren’t the same.

• Profitability – Revenue (money coming in) minus expenses (money going out) over time.
• Liquidity – How much actual cash you have right now to pay bills.

You can be profitable and still run out of money if revenue is delayed or locked up in invoices. On the other hand, a business that isn’t profitable can keep going if it has enough cash reserves.

There are three main types of cash flow that you can use to help you make better decisions for your startup:

• Operating Cash Flow – The money coming in and going out from daily business activities (e.g. customer payments, payroll, rent).
• Investing Cash Flow – Money spent on or received from investments (e.g. buying equipment, selling assets).
• Financing Cash Flow – Cash from investors, loans, or repayments of debt.

A strong business should generate enough operating cash flow to cover expenses without constantly needing outside funding. But even successful businesses can hit cash flow problems. The main reasons are:

• Delayed payments – Customers take 30, 60, or 90 days to pay, but your expenses don’t wait.
• High spending – Rapid hiring, big marketing spends, or expanding too fast can drain cash quickly.
• Mismatched costs – Expenses like rent and salaries stay fixed, but income can fluctuate, leading to shortfalls in slow months.

To avoid running out of money, businesses need to track their cash flow and plan ahead. To do that, you need a cash flow audit.

1b. Do a cash flow audit

A cash flow audit is like a health check for your business finances. It helps you see where money is coming from, where it’s going, and whether you’re at risk of running out.

To do this, start with the three critical cash flow metrics:

• Cash on hand: How much money is in your bank accounts right now? You should always have a few months of expenses kept ready to go.
• Burn Rate: How much money do you spend each month? If you’re spending more than you’re bringing in, you need to have cash reserves or a plan to change that.
• Runway: If revenue stopped today, how many months of expenses could you cover before running out of cash? The longer your runway, the safer your startup’s stability.

Example: If you have $1 million in the bank and burn $200K per month, your runway is 5 months. If your revenue is delayed or an unexpected cost arises, you could be in trouble.

Next, check your core financial reports to identify risks:

• Profit & Loss Statement – Is income steady, or are there big ups and downs?
• Balance Sheet – Are there lots of unpaid invoices? Does the business owe money to suppliers?
• Cash Flow Statement – Is the business consistently spending more than it’s bringing in?

Finally, break down your cash flow to understand where money is going:

• Fixed Costs (must be paid every month) – Rent, salaries, insurance.
• Variable Costs (change based on income) – Marketing, sales commissions, transaction fees.
• Revenue Sources – How reliable is the income? Do customers pay upfront, or are payments delayed?

Example: If a business gets most of its income from corporate clients who take 60 days to pay but needs to pay employees every 30 days, there’s a cash flow gap.

When you know these numbers, you can spot risks early and make sure you have enough money to keep running.

Part 2: How to strengthen your cash flow

Understanding cash flow is one thing. Managing it well is another.

Many late-stage startups fail, not because they don’t have revenue, but because they don’t manage when money comes in versus when it goes out.

If you want your business to grow without running out of money, you need a plan. That means looking ahead, getting paid faster, and being smart with spending. Here’s how to do it.

2a. Build a cash flow forecast

Many startups run out of money because they only focus on today’s bank balance instead of what’s coming in the next 6-12 months. A rolling cash flow forecast helps you stay ahead.

It’s a simple model that updates regularly to show how much cash you’ll have in the future. This way, you can fix problems before they become emergencies.

A good cash flow forecast includes three things:

• Income: How much money you expect to bring in (but be conservative).
• Expenses: What you need to pay (fixed, variable, and one-off costs).
• Best & Worst-Case Scenarios: Plan for good times (steady growth), normal times (some delays), and bad times (less income, more costs).

This gives you a game plan to handle cash shortages before they happen.

2b. Get paid faster with better accountants receivable

A big problem for growing startups is slow customer payments.

You close a deal, do the work, send an invoice… then wait 30, 60, or even 90 days to get paid. Meanwhile, bills and salaries don’t wait.

You can’t let customers treat your business like a free credit line. To speed things up:

• Shorten payment terms: Instead of Net 30, ask for Net 15 or upfront deposits.
• Charge late fees: A 2-5% penalty makes most people pay on time.
• Offer discounts for early payments: A small 1-2% discount can get you paid within a week.
• Automate reminders: Tools like Xero and QuickBooks send automatic follow-ups.
• Use invoice factoring (as a last resort): If cash is tight, some lenders will buy your unpaid invoices at a small discount, giving you cash upfront.

The goal is to get money back in the bank faster so you can keep growing.

2c. Manage bills with better Accounts Payable

Just like you want customers to pay you quickly, you should pay suppliers as late as possible – without damaging relationships. This keeps more cash in your business longer.

Here’s how to do it:

• Negotiate longer payment terms: Many suppliers will agree to Net 60 or Net 90 if you ask.
• Time payments wisely: Don’t pay bills the moment they arrive—pay just before the due date.
• Prioritise important bills: Pay salaries, rent, and key suppliers first. Delay less urgent costs if needed.
• Use credit smartly: A business credit line can help during tight months, but don’t borrow more than necessary.

The trick is to balance payments so you keep cash on hand while maintaining good supplier relationships.

Part 3: How to control cash flow costs

Good cash flow isn’t just about making money, it’s also in how you spend it wisely.

You might waste cash without realising it, thinking every expense is necessary. But cutting costs doesn’t always have to correlate with slowing down growth. It simply means making sure every dollar goes towards things that truly help the business.

Here’s how to cut unnecessary expenses, streamline operations, and manage debt so the business stays strong and keeps growing.

3a. Cut unnecessary expenses

When money is flowing, it’s easy to overspend: hiring too fast, paying for extra software, expanding office space, or running big marketing campaigns. But when cash flow gets tight, those same expenses can become a burden.

With this in mind, you can stay lean and focused by spending on what really drives revenue and cutting what doesn’t.

• Separate needs from nice-to-haves: Salaries, essential software, product development, and critical marketing are all needs. Fancy office perks, non-essentials tools, and excessive travel are all nice-to-haves. Cut anything that doesn’t directly contribute to revenue or efficiency.
• Audit your SaaS subscriptions: Many startups pay for dozens of tools they barely use. Cancel underused software or find cheaper alternatives. And always negotiate discounts, many providers offer better rates if you ask.
• Automate and streamline operations: Automate repetitive tasks (payroll, invoicing, email sequences) to reduce overhead, and outsource non-core activities like bookkeeping or customer support instead of hiring.
• Renegotiate vendor contracts: Suppliers would rather discount than lose your business. Get competitor quotes and use them as leverage to negotiate better rates.
• Reduce office costs: Hybrid or remote work cuts rent and utilities. If an office is needed, sublease unused areas or switch to flexible spaces like Stone & Chalk instead of long-term leases.

With these techniques you can make every dollar go further.

3b. How to manage debt

When your startup needs money to grow, and you aren’t bringing in enough via revenue, there are two main options: selling part of the business (equity) or borrowing money (debt).

• Equity means raising money by giving investors a share in the company. You don’t have to pay the money back, but you lose some control. It’s best when your startup needs a big investment for long-term growth.

• Debt involves taking loans or credit that must be repaid with interest. You keep full ownership, but you need regular income to cover repayments. Debt is best for short-term needs, like managing cash flow or funding strategies that already work.

Late-stage startups can (and often should) use some debt – it’s just a matter of knowing when and how.

• Venture debt: A loan for startups that already have investors, helping them extend their runway between funding rounds. It requires careful planning to avoid repayment risks.
• Revenue-based financing: Borrowing based on future sales, repaid as a percentage of revenue. Less risky than traditional loans but reduces profit.
• Credit lines and business loans: Useful for short-term needs but should only be taken if you can comfortably repay within a reasonable timeframe.

The key is to use debt wisely – only if it will lead to more revenue. Taking on too much can strain cash flow, so it’s important to plan ahead and avoid borrowing just to stay afloat. Debt should be a tool for growth, not a last resort.

Part 4: How to protect your cash flow

When you manage your cash flow well, you build financial stability so your startup can survive tough times. The best startups don’t just stay afloat; they create a safety net that allows them to grow with confidence.

Here’s how to build a cash reserve, track key financial numbers, and align cash flow with growth plans. If you get this right, cash flow becomes a strength, not a stress.

4a. Build a cash reserve

Some startups think as long as money is coming in, they don’t need savings.

But things like funding delays, losing customers, or economic downturns can drain cash quickly. Without reserves, businesses can be forced to make desperate decisions.

A good rule of thumb is to keep at least 3-6 months of operating expenses in reserve. This is how to do it:

• Save a portion of profits. Not every dollar needs to be reinvested immediately, it’s far better to keep some on hand in case its needed.
• Be disciplined in your investment. Think before making big investments—if revenue dropped by 50% next month, could you survive?
• Set up a backup credit line for emergencies. Even if you don’t need it now, having it available can help you manage unexpected shortfalls.
• Expect delays in funding. Investors take longer than expected, and deals can fall through. Always be ready with at least six months of runway.

Having a cash reserve and options to support yourself financially means you won’t have to raise money at bad terms or make harsh cost cuts just to stay afloat.

4b. Track your key cash flow metrics

Many startups rely on their bank balance to guess their financial health. This often leads to surprises when cash runs low. Successful founders track these four numbers every month:

Many startups rely on bank balance guesswork instead of tracking real financial metrics.

The best founders monitor four key cash flow metrics every month to stay ahead of financial trouble.

1. Burn Rate & Runway measure how long your startup can survive at its current spending rate. Burn rate is the amount of cash spent per month, while runway is the number of months before the company runs out of money.

The formula is simple: Runway = Cash on Hand ÷ Monthly Burn Rate. For example, if you have $1.2M and burn $200K per month, your runway is six months. Keeping a close eye on burn rate helps prevent sudden cash crunches.

2. Gross and Net Cash Flow track money moving in and out of the business. Gross cash flow includes all incoming funds from sales, investments, or other sources, while net cash flow accounts for all expenses.

If net cash flow stays negative for too long, the business is on a path to trouble.

3. Cash Conversion Cycle measures how long it takes to turn investments into cash. A shorter cycle means you get paid faster, improving cash flow without needing additional revenue.

The formula combines three factors: Days of Sales Outstanding (how long customers take to pay), Days of Inventory Outstanding (how long products sit before being sold), and Days Payable Outstanding (how long you take to pay suppliers). Reducing your cash conversion cycle frees up cash for growth.

4. Operating Cash Flow Margin tells you how much cash your business keeps from every dollar it earns. The higher the percentage, the healthier your business is.

The formula is: Operating Cash Flow Margin = (Operating Cash Flow ÷ Revenue) × 100.

Startups often have a negative margin at first because they’re spending money to grow. But you can't stay that way forever. A margin above 10% means your business is on the right track, and above 20% is excellent, the business is keeping a good share of its revenue as cash.

Tracking these numbers helps spot early warning signs before cash flow problems escalate.

4c. Balance your cash flow with your growth

Late-stage startups face a tough choice: spend aggressively to grow or keep enough cash for safety. The best ones find a balance:

• Invest in high-return areas – Spend on things that directly grow revenue, like customer acquisition and product improvements.
• Time big expenses carefully – Only expand when cash flow supports it. Always ask, “Can we afford this if revenue drops by 20%?”
• Manage investor expectations – Investors want growth, but they also respect financial discipline.
• Always keep a cash buffer – Scaling up shouldn’t drain all your savings.

Growing too fast without cash reserves can kill a startup. The best founders grow steadily and strategically, keeping their business strong even when surprises hit.

Final thoughts

When you have control over your finances, you can invest confidently in opportunities, negotiate from a position of strength, and avoid desperate fundraising at bad terms.

Great founders treat cash flow like oxygen – not just something to think about when it’s running low, but something to manage every day.

When you track, plan, and control your cash flow, you set yourself up for growth. That’s how you build a strong business.