Posted on in Sales

How to Better Manage Cash Flow

Keeping the cash flowing in a positive direction is a full time job, especially when you’re working to meet projections for the week, the quarter, or the year. However, it is possible to perfect the cash flow management process for your business with a little fine-tuning.

Balancing Act

While you may have a plan of action when it comes to money matters and designing a cash flow model, there are many factors that can affect the success of your forecast. One of first things you must do is create a realistic versus optimistic cash flow model.


In business, as in everyday life, unexpected problems can arise at any time. Customers may pay late, or not at all, an upcoming project may be cancelled without warning, and employees may quit without notice. Because unforeseen issues happen, you need back-up plans to keep your company afloat during financial storms. This is where a cash flow management system with consistent and realistic projections will help you see the big picture and allow you to make adjustments to improve your cash flow.

Business Growth

Every business owner wants to see their company grow, and sometimes the attitude is “the faster the better.” Unfortunately, if you’re only focusing on the fast track to growth, you may miss the opportunity to generate a cash reserve for those unexpected situations. Having a cash reserve will alleviate stress when problems surprise you because you won’t get stuck tapping into your profits. A healthy profit margin also works by making your company look like a solid investment for partnerships.


This is one area that can be like a rollercoaster ride. Things come up and situations arise that can affect a customer’s ability to pay on time. When this happens, it has a direct effect on the cash flow. Too many customers paying late can put a financial strain on your business, making it difficult to pay the company’s monthly bills.

If you find your business in this position, contact the late-paying customers and work out an alternate payment plan to get money in the bank as soon as possible.

While working with your late paying customers, contact your debtors to work out a payment schedule of your own. This will allow you to better regulate your cash flow.

Flexible Solutions

Get creative with viable solutions to cover those times when cash is ebbing instead of flowing. Apply for a small business loan or a line of credit, but do it before you need it. If you already have a long term loan but the monthly payment is high, consider refinancing to lower the payment and increase the cash flow.

Managing Receivables

If you want to have a successful cash flow, it begins with accurate and timely invoicing. An inaccurate invoice delays payment, and sporadic invoicing has the same effect. Check the invoicing process for your company and make improvements to ensure cash is consistently flowing in.

While acquiring a new customer is good for business, unless you do a credit check, you have no history of their track record when it comes to paying for goods or services. Avoid being left in the lurch with an unpaid balance by running an initial check.

For customers with who plan to carry a balance with your company, you have two options. First, ask for a deposit. This puts money in the bank immediately, which promotes better cash flow. Second, work out a payment plan at specific stages of a project, for example. This ensures money is flowing in, and you’ll know when to expect it.

Planning Finances

One way to stay organized and manage your cash flow is to set automatic payments for your business expenses, whenever possible, on or near the last day of the due date. Making payments early may feel good but it doesn’t earn you anything other than a dip in your cash flow sooner than later.

Manage your business credit cards wisely. Carrying a balance from month to month is not cost-effective because of the interest rates. Keep credit card balances paid in full each month. This allows you to save money that can go into your cash reserve fund.

If you find that your business is in a cash flow crunch and you need to apply for a loan, talk to your lender about the benefits of a long-term loan versus a short-term loan. Don’t be in a rush to take the first loan that comes along. Do your research and look for a lender that offers a low interest rate, long-term payback, and low monthly payments. This enables your business to avoid a hefty outlay of cash.

In any business, maintaining a fluid cash flow and insightful forecasting are the keys to maintaining a positive base that can handle unexpected issues. If you don’t forecast at all, or if your forecast is unrealistic, your business can end up on a slippery slope.