Cash Flow Management: 3 Tips for Small Businesses

Cash is the lifeblood of all businesses. You need cash to cover operating expenses and have enough left over to invest in future business growth. If you run out of cash, your business will not survive for long. More than 65 percent of small businesses fail within the first ten years of their establishment due to poor cash flow management. Effective cash flow management for small businesses is crucial to establish a foundation for growth and ensure long-term viability.

Achieving a positive cash flow requires strategic planning and good financial management. Businesses should strive to minimize cash outflows and maximize inflows to improve their financial health. Fortunately, there are many cash flow management software solutions that can help businesses control their finances more effectively. Below, Seamless Chex will provide some useful cash flow management solutions for small businesses to help you preserve more money for running and growing your enterprise.

Develop a Financial Plan

This might seem obvious, but developing a financial plan for the future is one of the most effective strategies for improving your business’s cash flow. As your business matures, you will gain a better understanding of how much money is coming in and going out. You can use this information for developing financial projections to avoid potential cash shortfalls in the future. An effective financial plan will act as an early warning system for your business, allowing you to prepare for financial emergencies to minimize the risk of running into trouble.

How to create an effective financial plan?

How can you create an effective financial plan to improve cash flow management for small businesses? To develop an effective financial plan, you need to start with accurate bookkeeping. Accurate financial records will help you get a clear picture of your earnings and expenses so you can work to accomplish a positive cash flow in the future. You can use accounting software to automate bookkeeping tasks and ensure all financial transactions are recorded accurately.

Using data from your accounting reports, create monthly financial forecasts to anticipate incoming and outgoing payments. How much do you expect to earn from sales, service fees, debt collection, and other income sources? How much will you spend on salaries, loan payments, taxes, etc? You can use cash flow management software to simplify this daunting task. Financial forecasts improve cash flow management for small businesses as they help companies prepare for contingencies, ensuring sufficient funds will be available for covering future expenses.

Reduce Business Expenses

Reducing business costs is one of the best strategies for improving your cash flows. Expense reduction helps businesses save more money to ensure long-term viability. Strategic cost-cutting helps businesses:

• Run smoother operations
• Reduce cash flow problems
• Preserve more money to invest in business growth
• Ensure good relationships with vendors and creditors
• Lower the cost of their products to beat the competition

Cost-cutting drastically improves cash flow management for small businesses, but choosing where to reduce expenses can be a tough choice. Most businesses struggle to decrease operating expenses without downsizing their workforce or lowering the quality of their products. The good news is, there are plenty of effective cost-cutting strategies that don’t require you to fire employees or sell lower-quality products.

Use these tips to cut business costs while preserving product quality and keeping employees happy:

• Reduce business travel
• Look for new vendors to get good bargains
• Audit and eliminate unnecessary expenses
• Use technology like cash flow management software to improve efficiency
• Outsource business operations and tasks if they cost less than doing it in-house

Accelerate the AR Collections Process

Many businesses have steady sales but still experience cash flow problems because they don’t get paid promptly by their customers. According to a report released by Intuit in 2019, more than one-third of businesses struggle to pay their vendors. Cash flow management for small businesses can be significantly improved if you develop strategies to get paid faster. Speeding up the accounts receivable (AR) collections process will bring more money into the coffers, helping reduce cash flow issues in your business.

Here are some strategies you can implement to accelerate the money collection process:

• Issue invoices promptly
• Offer more convenient payment solutions
• Follow up regularly with late-paying customers
• Provide discounts and other rewards for on-time payments

You can use modern payment technologies like Seamless Chex’s Paynote to improve cash flow management for small businesses. Paynote creates instant electronic invoices and provides a quick and convenient payment solution to accelerate your business’s AR collections. You can use Paynote along with cash flow management software and solutions to boost the inflow of funds into your business.

Improve Cash Flow With Seamless Chex

Cash is king when it comes to determining business success. You need to have a positive cash flow to ensure business viability. Without sufficient cash to run a business and invest in future growth, you can go belly up and become another statistic pretty quickly. Adopting smart cash flow management strategies for small businesses can boost your money reserves and help you operate a successful business.

If you want to speed up your business’s payments collection process to improve cash flows, we can help. Seamless Chex’s Paynote provides quick invoicing and easy payment processing to help you get paid faster. Contact us to learn more about Paynote or sign up now to start receiving payments instantly.