Cash Flow Management Tips for Small Business Owners

Posted Date : 28-January-2019
cash flow management tips
I think you will agree with me when I say proper cash flow management is the backbone of any small and medium sized businesses. But most of the small business owners fail to manage their cash flow perfectly.
But, stop worrying about the cash flow management because this article will provide you with the tips for better management of the cash flow for the small businesses.
  • Start Anticipating the Future Needs

  • Most of the business owners get surprises or should I say shocks for once or more than once in their career. It is very common in any business to face some of the unexpected twists. If you are in business, you should be ready to face any kind of situation.
    It indeed is difficult to search for the cash when you are on short fall. So make sure to project the needs of the future now and save up the cash.
    Once you are in the business, you will understand its pattern and how it goes in the near future too. So check your previous month records and start estimating the situation of your business for 3 to 6 months.
    These statements will help you in understanding the future needs and will give you some time to make up for it.
    Some of the business owners anticipate the future need and they start a relationship with the bank for payroll. You can also do this and one thing that you should remember is providing your bankers with operating statements of your business from time to time. This helps in building the trust.
  • Know the Breakeven Point

  • The breakeven point is the point where your revenue meets the expenses and once the figure is established, you should start paying close attention to the position in order to scale your business. This figure will help you in estimating about the business. You should be able to identify this point and take necessary actions.
  • Start Using Accounting or POS Software

  • The accounting software provides key metrics that will help in better management of the cash flow.
    Also, there are some POS software like HDPOS Smart that offers accounting feature too. If you want you can even opt for it too. This way you will be able to understand each and every expense of your business.
  • Start Building Connections with the Lenders

  • From banks to private lenders, no one would be interested to lend money for a desperate business owner. So start building the connections in early stages only From the beginning start establishing relationships with the members of financial community when you aren’t expecting anything from them.
    You will be able to make good friends and there is a possibility of getting a loan promise.
  • Streamline the Receivable Accounts

  • When you are invoicing your customers or clients, make sure that the invoice is cleared as soon as possible. If it is possible, ask the customer to clear the invoice immediately. Asking the customer will help you to get paid faster. Do not keep the timeline for more than 10 days because if your cash gets struck at the customer for more time, you won’t be able to manage the cash perfectly.
    Provide your customers with these details at first only so that there won’t be any issues after issuing the invoices.
  • Extend the Payable Accounts Timeline

  • You should get your invoices cleared as soon as possible and at the same time you have to do exactly opposite to the accounts that are payable. If you are working with different suppliers and vendors, make sure to pay them in 30 days or 60 days time period. This extension of payable time will surely help you in saving some amount.
  • Keep the Cash Working

  • There is an age old saying “poor people work for cash whereas rich people make the cash work for them”. This saying is partially true because a man who has idea of how to make money work for him will make sure that money works even it is 100 INR or 100000 INR. You can do this too.
    No, I am not saying about investments in stocks or mutual funds. You have to keep your cash balances in high interest paying accounts. There is no risk involved in it and you will be receiving interest on your cash from time to time.
    The banks usually offer less interest rates on business accounts so open an account for maintaining the savings amount. Visit a bank that offers higher interest rates and open an account there. They will surely charge a good amount of minimum balance, deposit it and keep your cash flowing.
    Instead of paying your employees with checks, deposit amount in their bank account directly. This way you will save amount on check book and the processing charges too. A bi-monthly cycle on your payroll account will save some administrative costs too.
    Another important thing is do not invest amount for a certain time period. Make sure that you can access the cash immediately.
  • Spread Out The Expenses

  • Spreading the expenses is a common mistake that almost all the small business owners do. This will affect a lot on their cash management. They set a particular date for paying all of the expenses and this is the day when they drill a big hole in their pocket. So instead of paying all the expenses at once, you can spread them out for different dates.
    If you are afraid of forgetting the payments, then you can set up digital payments scheduled for different dates.
  • Be Very Frugal When It Comes to Expenses

  • This is a common yet most ignored tip. Most of the small business owners usually fail to identify the expenses that are helpful for business and aren’t. They fall prey for the marketing techniques and buy some products or services that are of no use. So if you want to save up a good amount then try dividing the expenses into must have and nice to have.
    Make a list of things that fall into the category of must have and nice to have. Now start investing in the must have things only. Try to search for cheaper alternatives for the products that you must have for the business. If you find some, then it will surely help you in saving up some amount.
    Editor’s Note: To see where you are spending money, you can use POS billing software. It will keep track of every single penny.
  • Try to Maintain a Cash Reserve

  • “Expect the best and prepare for the worst” is very important phrase that is suitable for small business owners. You never know what happens and it is important to have a cash reserve. Maintain a separate account and keep depositing some amount in the cash reserve from time to time.
    Do not touch the cash until and unless an emergency arises. This is your backup plan that will help you when you encounter any worst case.

Final Words

These are some of the tips that will help in cash flow management for your small business. It is hard to gather funds and manage them but if you maintain a proper way everything will fall into the place eventually. So try following above mentioned tips for proper management of the cash flow.

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