Cash flow management for small businesses

The following are some of the steps you can take in order to kick start an effective financial and cash flow management plan.

For many small businesses, managing cash flow can be problematic. Variations in the amount of cash flowing in and out of the business each month, waiting for invoices to be paid and still managing to pay all your bills on time can be a hard balance to achieve.

Putting into place a financial management plan, can help alleviate some of these problems, however and make for a smoother, less chaotic cash flow.

The following are some of the steps you can take in order to kick start an effective financial and cash flow management plan.

Create a cash flow chart

You will already have a good understanding of how cash flows in and out of your business each month, but creating a cash flow chart, that you can stick to the wall of your office can really help.

Where the chart may differ from your accounts spreadsheet is that it will be a simplified, easy on the eye chart and will include projections for future revenue.

Realistic projections are extremely useful, as they will help you to plan and help indicate how much money you can borrow, if this should be required in the short term.

Access outstanding revenue

It is quite common for small businesses to encounter problems due to outstanding invoices – waiting for these to be paid can throw even the best of financial plans off track.

One solution is to borrow that capital in advance of the payment from a company that specialises in such matters. This way, you can keep cash flowing around the business unhindered by late payments.

Selling invoices in this way is becoming common practice within the small business community, with the rise of the fintech sector.

Build up a reserve

Easier said than done for some, but good practice as and where possible, having a pool of surplus capital that you can dip into if the going gets tough can be a life saver.

Other ways to achieve this is by having a company credit card, particularly if it offers cash back. In both cases, any capital taken out must be replenished within a short time frame if it is to be a sustainable option.

Factor in a promotions strategy

Well-thought-through promotional activities such as sales and special offers, if factored into a financial management plan, can be a real boost to a company’s cash flow.

Here it is important to follow the plan closely, reactive promotions can have a negative effect, as they simply push forward a cash flow problem to the following month as opposed to acting as an injection.

Think of these activities as a bonus and not a necessity.

Just because a business encounters cash flow problems from time to time, doesn’t make it a bad business, that said, few would deny that such problems can be stressful.

Finding effective ways to cope with these problems in advance of them occurring is the best way to avoid stress and will leave you with more time to plan how to get your business to the next level – one where cash flow problems are no longer a concern.

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

Related Topics

Managing Cashflow

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