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Growing Business

Cash Flow Management Strategies

Posted by Jeffrey Latterell, and Ross Taets on Wednesday, September 21, 2022

Positive cash flow is critical to your short- and long-term success. If your cash flow isn’t where it needs to be, let us help with these nine management strategies.

Small Business Owner Managing Cash Flow

9 Small Business Cash Flow Management Strategies

Cash flow is an important financial indicator of the health of your small business. It accounts for everything your business brings in, including sales, accounts receivable and loan advancements; and what flows out, like payroll, rent, taxes, suppliers and loan payments.

If your small business has slower revenue streams, you may face cash-flow forecasting challenges. It’s a common problem. According to Score, the nation’s largest network of expert business mentors, more than 82% of businesses struggle with cash flow. To combat this, incorporate our nine management strategies.

1. Stay on Top of Bookkeeping

Every business has a high and low season, so it’s critical to track your income and expenses daily. You don’t want to forget you have a quarterly tax payment coming out on a specific day as it may cause your account to be overdrawn.

Reconciling your monthly budget at the same time each month will allow you to more accurately track your current financial situation as well as your cash flow statement. This statement shows you all your cash inflows, minus outflows, to tell you how much you have on hand to operate your business. If you have less cash than you need, you can take a look at where your money is going and decide whether to cut costs or adjust your pricing to increase your margin. Most accounting software products, including Quicken® and QuickBooks®, allow you to input your financial data and generate a cash flow statement.

2. Adjust Your Inventory or Service

If you are dealing with low cash flow, it may be time to review your inventory or services. Identify what is selling well and what isn’t, as well as the cost of your product or service. If you need to increase your monthly sales, there are a few strategies you can try, including:

  1. Offering a discount to move products that aren’t selling well.
  2. Evaluating your product inventory or services offered to eliminate what your customers aren’t buying.

3. Bill Invoices Promptly

No matter how small the amount, make sure to send timely invoices to your customers. Don’t delay sending an invoice or let your receivables go past 60, 90 or 100 days. If you’re granting your customers a 90-day payment term, you could consider scaling that back to a 10-day payment term or charging a fee if they wait longer than 10 days to pay on their invoice. There are plenty of online payment options and scheduling software that can help you automate the process, making it easier for you to accept and process payments.

4. Negotiate Payments With Suppliers

You may be able to renegotiate payments to suppliers or vendors until your business is financially healthy. Ask your suppliers about their payment terms to see if you can coordinate your payments with your cash inflows. If you are unable to negotiate new payment dates, consider restructuring payments. You can meet with new vendors and use the information from competitors to negotiate the price.

5. Lease Equipment Instead of Buying

Lessen your short-term financial burden by leasing equipment instead of buying. You won’t need to upgrade or sell outdated equipment, and equipment leases often qualify for tax credits. Some banks offer leasing programs with financing options up to 100%, which can allow you to maintain a more regular cash flow.

6. Tap Into Financing Options

A line of credit can provide quick access to funds when you need to bridge gaps between payables and receivables. For example, if you are a contractor in the construction and manufacturing industry, you may be dealing with long lead times or need to purchase materials for a job before you get paid, which can impact your cash flow. A line of credit can also help with the seasonality of some businesses. For instance, if you’re a retailer you may need to purchase additional inventory or supplies during the holiday months than you routinely hold. With a line of credit, you can borrow funds and only pay interest on the outstanding balance. Then when receivables are collected or inventory is sold, those funds can be applied to the line of credit and the balance becomes available again when needed.

In addition, there are plenty of short- and long-term small business loan options available, such as working capital loans and Small Business Administration (SBA) loans. A commercial banker or SBA loan provider can offer advice on what type of loan will benefit your business and help with cash flow.

7. Use a Business Credit Card

Free up cash by using a business credit card. A credit card can help you keep track of everyday expenses through online banking and monthly statements. It allows you to take advantage of cash-back rewards and other perks such as free online expense reporting tools and mobile payment capabilities. Banks can often offer you a flexible and low-cost line of credit or a 0% introductory rate.

8. Use Online Payments and Electronic Fund Transfers

Make sure you take advantage of technological advances that can streamline your business process and increase efficiency. One of these tools that banks offer is automated clearing house (ACH) services, which allows for electronic payments and collections without a paper check, credit card or physical contact. It takes about two days to process; however, there are same-day ACH services available that can help if you need to wire a payment to a vendor.

In addition, there are other services, like online banking, where you can use your laptop or a mobile device to view your accounts, make transfers between accounts and more. Remote Deposit Capture is an online option that allows you to deposit checks into your account from your computer or mobile device. These services can help you spend less time worrying about cash flow and more time running your business.

9. Chat With Your Lender

If you are concerned about your cash flow, contact your commercial banker. They can set aside time to go over your current financials, review your cash flow statements and discuss loan options if you need assistance.

Developing and implementing effective cash flow management strategies can help your short- and long-term financial success. Reach out to one of our Commercial Bankers today to see how they can help your small business.


The Authors

Jeffrey Latterell

Jeffrey Latterell

Treasury Management Representative, VP

LinkedIn Email


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