Jaime Medina
Of course it is important but… cash management in a startup has nothing to do with an SME or a corporate.
A startup’s success or failure isn’t usually determined by how well it handles its daily liquidity, especially in the early stages. But we all know startups die when they run out of cash. Funding rounds are seen as key milestones precisely because they bring a fresh injection of liquidity. Startups end up dying when they find that the bank account hits €0 and there’s a lack of cash.
So, what does efficient cash management mean in theory? If you look it up online, you’ll find advice around payment cycles, collecting receivables quickly, paying suppliers slowly, accessing financing tools for customers and suppliers, hedging currency risk, or even using techniques like cash pooling in corporate groups. These concepts matter in any business, and yes, a startup can certainly apply them. But how much do they really move the needle?
In the case of startups, they’re rarely the priority. Startups usually operate with heavy losses in their early years. Funding is raised to be invested in high-risk, high-reward bets that may take years to pay off. That’s why it’s often more relevant to know how much cash is left from the last round than to focus on optimizing every euro of operations. If a startup has raised €5 million but is generating only €10K or €20K per month in revenue, whether collections are slightly faster or slower won’t make a material difference. The same with currency risk, which is usually irrelevant as well, since early internationalization is often minimal.
Still, cash management is important in a startup, but the focus is different. The main goal is to stretch the runway: how many months you can survive before needing to raise again. That means having a precise cash forecast, anticipating delays in payments, collections, and taxes. It means implementing financing alternatives early enough, not when cash is abundant, but not too late either. Switching to annual billing for recurrent products can mean a lot. And most importantly, you should always be looking for alternative, non-dilutive funding options to strengthen your position.
So yes, cash management matters. But standard SME best practices won’t get you far. Startups need their own playbook. The tools may look similar, but the mindset is different. Knowing how to use them, and when, can make the difference between running out of cash or staying one step ahead.
