Actionable Cash Flow Management Tips for Small Business Success

It’s an undeniable fact of business that you need money to make money. If your small business doesn’t have a healthy cash flow, you may struggle to afford the materials and services necessary to grow your business. Worse yet, you may join the 82% of businesses that go under because of poor cash flow management. What can you do to avoid becoming the wrong kind of statistic? Presented below by Speck Designs, check out a few actionable tips to help you better manage your money.

Understand What Cash Flow Is

Cash flow is not the same as revenue. According to Bench, cash flow is the actual cash that comes in and out of your business in a designated timeframe. Positive cash flow occurs when you have more money coming into your business than going out. Negative cash flow occurs when your outflow exceeds your inflow. If you routinely have negative cash flow, you will eventually run out of money to operate your business, hence the importance of cash flow management.

Streamline Your Invoicing and Receivables Processes

Small businesses with lengthy invoicing terms often struggle with cash flow problems. This is because they must continue to push money out to render services or develop goods even as revenue trickles in.

Streamline your invoicing so that customers only have 30 days from the date of the invoice to pay it. Invest in an invoice automation system to ensure bills go out immediately upon the close of the billing cycle. Finally, make it easy for customers to pay by accepting online payments.

Additionally, it’s a good idea to integrate an API for financial transactions so that you can receive notifications whenever there are new transactions associated with linked accounts. That also allows you to retrieve 24 months of transaction data, should the need arise.

Incentivize Customers To Pay Early

If possible, encourage customers to pay via credit card or cash upfront. If you must invoice, incentivize early payoffs by providing discounts for doing so, offering better terms for early payments, rewarding customers for early payments, and implementing a late fee. In addition, request deposits upon purchase.

Negotiate New Terms With Vendors  

To prevent outflow from exceeding inflow, make vendor terms similar to those you offer your customers. For instance, if you require customers to pay every 30 days, negotiate new terms with your vendors that allow you, too, to pay every 30 days.

Improve Inventory Management

Efficient inventory management means striking the delicate balance of always having enough inventory to go around but never too much that it just sits. If you have not achieved that balance, you risk losing money and, possibly, your customers. Pay attention to demand and analyze data using inventory management software.

Lease Instead of Buy

You need equipment and supplies to operate your business, but both can be costly. Leasing instead of buying allows you to spread out the cost of the equipment, offers greater flexibility than other financing options, and makes it easier to upgrade to newer models.

Put Money Into a High-Interest Account

Make your money work harder for you by investing in a high-interest business account. Carefully check rates, fees, and balance requirements.

Keep Accurate Financial Records

Staying on top of your cash flow is vital. If you do not have the time or personnel to handle it, invest in cash flow management software and/or hire a virtual assistant or a marketing consultant. The hourly rate for a marketing consultant is between $28 and $98 an hour, depending on their experience level, but adds considerable value to your business. Be sure to check credentials and consider reviews, cost, and delivery time before making a hire. Also, look for smart ways to store your digital records; many people opt for PDF, which is great for larger files. 

Poorly managed or negative cash flow can ruin your business. Don’t let it by deploying these tips today.

Speck Designs has been building a reputation that exceeds all expectations. No matter what type of project you need to complete, we can assist you or connect you to the right person for the project with our extensive network that we have built over the years. Call 616.259.4359.