10 Tips for Cash-Flow Management

Have you heard the phrase “Cash is king?” It applies to business, too! Businesses can live and die by cash-flow management, or the ability to make sure the business has money in the bank when it needs it.

According to Investopedia, cash flow is defined as “the net amount of cash and cash-equivalents being transferred into and out of a business. At the most fundamental level, a company’s ability to create value for shareholders is determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flow.” As a small business owner, the ability to properly manage and maximize your cash is key to success.

In this blog, we’ll cover our top ten tips for cash-flow management to ensure that your small business has the money you need, when you need it.

1. Good reporting is critical for management – Having a great accounting system will give you confidence that the numbers you have are solid and a good foundation for management decisions.

2. Know your banker – deepen relationship – Having a great relationship with your banker will ensure that they will understand your vision and your goals, which increases your chances for support when you need it.

3. AR Management – Verifying that the terms of your accounts receivable (money coming in) are terms that allow for cash flow to be where you need it to be in your business.  Is the turnaround working well? Are you billing quickly?

4. Vendor Discounts – Do your suppliers offer discounts for paying early?  Are you maximizing those discounts? Good reporting will help you manage this additional cash flow opportunity.

5. Inventory controls – Your accounting system should give you information on your inventory system. Review these reports to tighten up management of your inventory. Ask yourself questions like: Are you holding too much inventory for too long? What process can you improve?

6. Industry Standards – Check in with other industry standards. Contact Anne Macdonald, Business Librarian with the Poudre Library, who can help. Are your ratios of revenue and expenses in line with your industry? How do you want to stand out?

7. Pay periods – utilize an accrual of payroll before pay date – Utilizing an accrued week or several days between pay period ending and pay date can be a cash flow lifesaver for a business.

8. Verify your terms with suppliers and customers – Question your terms for your suppliers and customers. Even for new businesses, you can make the rules. Make terms that work for your success.

9. Determine your break-even or burn rate – Find out what your financial goals are even on a weekly basis. Understanding what you need on a monthly or weekly basis can help you manage your business each day, knowing your benchmarks.

10. Have a Solid Team – Have competent, trusted people involved that can help you or manage the financial reporting for you. Accepting nothing less than a team you feel supports your goals and has your back can make all the difference. (Of course, Tally Services would love to support you!)

Does your business need help managing your cash and getting your flow sorted in a way that supports your goals and needs? Contact Tally Services! We’re here to help you create the systems you need to make sure your business has the cash it needs to properly run, and improve that flow over time to help you grow. Tally Services is a business accounting and bookkeeping service in Northern Colorado, and we’re ready to help you take your business to the next level. Contact us to get started!