Why each business model needs its own cash strategy
Companies don’t close because they lack profit, but because they run out of cash. And the way to get more cash depends a lot on how you make money. A SaaS business gets paid every month, a consultancy gets paid when the project ends and a shop pays for its stock before selling it. Here are the tips that work best in each case.
If you sell subscription software (SaaS)
Subscription is one of the easiest models to forecast, but it also has weak spots: if many customers leave or pay late, your cash suffers straight away.
1. Push the annual plan.
Getting a customer to pay for the year up front has three advantages:
- You keep them for 12 months.
- You get cash to reinvest in winning new customers. For example: your customer acquisition cost (CAC) is €50 and your average monthly revenue per customer (ARPU) is €20. If you offer a 30% discount on the annual plan, you collect €168 up front (€20 × 12 × 0.7). After recovering the CAC, you have €118 left, enough to win two more customers. If any of them also choose the annual plan, the effect repeats.
- You build a cash cushion for the quieter months.
The limit will be your support and operations team: growing faster than you can serve customers is also a risk. The ideal is to do both: grow your customer base and, at the same time, keep part of that cash aside.
2. Consider a one-off lifetime deal, with care.
Offering the product for life in exchange for a single payment can bring in cash quickly through a time-limited campaign. But those customers will never pay again: make sure you can keep serving them for years.
3. Cut failed payments.
Check expired cards and returned direct debits every month, and warn customers before their card expires. Every payment you recover is cash you had already counted on.
If you provide services
In services, the risk lies in the time between doing the work and getting paid.
1. Invoice as soon as you deliver.
Every day you delay the invoice also delays its due date.
2. Check every invoice, but send it the same day.
A mistake on the invoice delays payment, and so does sending it late. Do a final check and send it without waiting.
3. Ask for a down payment.
Before starting a project, ask for part of the fee in advance. If the project is paid on results, agree in writing when you would return that advance and review the terms with your legal adviser.
4. Split projects into milestones.
Invoice part of the fee as each milestone is completed. It is common practice and your customer will understand it if the milestones make sense.
5. Make paying easy with a link.
Payment gateways let you add a link to the invoice so the customer can pay by card straight away. The easier it is to pay, the sooner you get paid.
6. Add subscription services.
A maintenance plan or monthly fee gives you recurring, more predictable income, and it is usually paid by card or direct debit.
If you sell products (physical shop or online)
In retail, a good part of your cash is sitting in the warehouse: you have already paid for the stock you haven’t sold yet.
1. Adjust prices and create bundles.
Review your prices and offer sets of products that make sense to sell together, with a discount that still leaves you some margin.
2. Clear your slowest-selling products.
A discount on those products turns into cash stock that would otherwise stay tied up.
3. Optimise your stock.
Buy according to real demand. Every euro of excess stock is a euro you don’t have in the bank.
4. Offer volume discounts.
Encouraging large orders helps you move stock and bring in revenue at the same time.
5. Be careful with free shipping and returns.
Free shipping or local delivery can boost sales, but it has a cost: build it into your margin. A longer returns period can encourage people to buy, but it also delays the moment a sale becomes final. If you extend it, take it into account in your forecast.
6. Reconcile your payment gateways.
If you take payments through Stripe, PayPal, Redsys or Adyen, each gateway pays you out on different dates and with fees. Reconciling those payouts with your sales tells you how much you will really receive and when.
Before you decide, measure the impact on your cash
These measures will give you more months of runway, but how many? Are they enough? Do they suit your business? Making decisions without knowing their future effect rarely ends well. With Orama you can build your cash flow forecast for 12, 18 or 24 months, or whatever horizon you need, and simulate each measure as a scenario before applying it. Your banks and payment gateways are updated up to 4 times a day (every 6 hours).
Try Orama free for 7 days or book a 30-minute demo with our team.
