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Seven Cash Flow Management Tips for Small Business Owners

Poor cash flow management is one of the most common reasons for small business failure. If you are spending more money on expenses than you have coming from sales, customers or clients, you have a cash flow problem that should be addressed as soon as possible. PEAR Accounting Solutions is here for you with a few cash flow management tips:

1. Create a separate bank account

Don’t mix your personal and business finances. Get a dedicated bank account for your business. The ideal account should have business-focused features and work well with your payroll software, in addition to providing immediate access to funds and offering high-yield interest on your cash. You can open a business bank account online today that will make the management and forecasting of your cash flow effortless.

2. Hire accounting professionals

Hiring professionals to handle your books is one of the best ways to improve cash flow. Not only will you have the peace of mind knowing that your financials are being taken care of, but you will have more time and energy to spend on other aspects of growing your business. Work with a team of experts like PEAR Accounting Solutions that can offer a wide range of accounting services — from cash flow analysis to digital bookkeeping and strategic business planning.

3. Keep an emergency fund

Just as in your personal life, it’s a good idea to have an emergency fund for your business. See if you can work into your budget to put a little money in the fund every week or month. If you build a decent emergency fund, you may not have to take out a loan — or at least, you can borrow less — when unexpected challenges arise.

4. Set up semi-monthly pay cycles

This may seem like a small detail, but it can save you time and money in the long run. Instead of running payroll on a bi-weekly cycle, run it on a semi-monthly cycle. This will help you avoid two unnecessary pay cycles of administrative expenses and allow you to run payroll 24 times per year rather than 26.

5. Capitalize on existing customers

Yes, acquiring new customers and increasing sales can help your business grow, but it also requires a lot of time and money. When facing cash flow challenges, focus your marketing efforts on existing customers. Your established customer relationships can help you analyze buying behaviors to encourage repeat business.

6. Manage your payables

Don’t be fooled by top-line sales growth, it can often hide serious cash flow issues that could lead to financial problems if you don’t address them. Be vigilant about evaluating all of your costs to see where expenses are outgrowing sales. Pay suppliers through electronic transfers on due dates (not before) so that you keep the cash in your account longer. Look for flexible terms when choosing suppliers — this can benefit your cash flow more than simply going with the cheapest option.

7. Manage your receivables

Finally, come up with ways to ensure your business gets paid on time. Send invoices promptly and don’t hesitate to follow up with customers who are late with their payments. Provide discounts to customers who pay their bills on time and do a credit check on any new customer that isn’t paying cash. If you have any obsolete inventory, sell it at a discounted price to reduce any storage expense.

Cash flow problems can cripple any type of business. Make sure you are continually assessing cash flow and are diligent about addressing issues. If you keep more money coming in than you are sending out, you will have a sturdy foundation for growth.

Do you need top-notch accounting for your small business? PEAR Accounting Solutions is the answer. Book a consultation online.

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