10 cash flow tips for small businesses
Here are 10 tips to manage cash flows that will help you find success.
1. Managing your cash flow is a vital part of the health of your small company. You know this already. Yet every business will eventually their share of cash shortages, so plan ahead to have the cash funds you need in place before you need it. Set up lines of credit in advance and keep a watchful eye on your cash outflows as well as inflows and the dates you anticipate revenue coming or going. A good rule of thumb is to have 3 to 6 months of cash on hand and the ability to borrow more if needed. Don’t wait until you’re against the wall.
2. Forecast, create and manage your budget wisely. Use the past as your indicator for the months ahead, both for receivables and payables. Use a custom business cash flow worksheet.
3. Keep an eye on your profits. Focus your efforts on maximizing your cash flow with profitable goals in mind. Knowing where your break-even point is won’t necessarily improve your cash flow, but it will help project positive cash flows going forward.
4. Book your cash faster and send receivables out slower. Be extremely deliberate in how you handle moving funds in and out of your budget. The faster you can get customers to pay you — and the longer payment periods you can negotiate with vendors — the more cash you’ll have on hand.
5. Accelerate your receivables whenever possible. There are many ways to speed up your receivables. Consider a bank lockbox; no matter where your customers are, they can mail their payments there for faster processing. Or employ electronic payments for even quicker access to cash. Be diligent; always stay on top of outstanding invoices if they are not paid promptly. Your cash flow is the lifeblood of your business the same way breathing air is to human survival. Treat it the same way.
6. Establish clear payment terms and payment policies in place so that you and your customers are always on the same page. Consider adding late fees to delinquent bills.
7. Look for the best ways to schedule outgoing payments by strategizing your accounts payables. Whether it’s the purchase of equipment, raw materials and supplies or simply monthly bills, be judicious. For example, extending payments to their maximum length, like 60 or 90 days, may free up extra cash. But no matter how it works out, always be sure to pay on time or negotiate with your vendors. You don’t want to cut off your nose to spite your face. Preserve your relationships.
8. Giving a discount to customers who pay quickly is a great way to jumpstart your receivables and bring cash in quickly. Consider creating referral rewards and offering more ways to pay, such as accepting a wide array of credit cards — or offering your own. The easier it is to engage with your company, the more cash flow you’ll generate.
9. Explore all your funding options before you need them. Many small businesses use credit cards to make the most of their payables and timely expenses. And if there is a shortfall, taking out a loan or opening a line of credit may be the perfect solution for you.
10. Monitor your results regularly. Even if your cash flow is doing well, you should continually examine and update your budget and forecasts at least once a month. Not only will it give you greater transparency into your business, but it will also allow you to see what’s working and driving profits and where you need to make adjustments along the way. You want to know where your money is at, and when and where it's going ALL the time.
If you do find your company in a position where you absolutely need to borrow. We can help. Net Equity Financial has many loan products ranging from refinance loans, receivables financing, commercial cash out financing, Please visit us online at or get a free quote