Our Favorite Small Business Cash Flow Management Tips In One Convenient Cheat Sheet

Does owning a small business feel like a never ending game of what am I going to learn today?

As a small business owner, it comes with the territory. But the good news is that there are resources and people to help. For instance, how in tune are you with your business’s cash flow management?

If that phrase seems overwhelming, don’t let it be. 

Just like every other business owner out there, you have a learning curve to get over. That’s why we’ve put together our favorite small business cash flow management tips and tools in this handy cheat sheet – just for you!

When you conquer a comprehensive understanding of your small business’s cash flow, several other very important aspects of your business fall into place. And the best part – your life gets easier! 

Get A Handle On Your Small Business Cash Flow

What better way to learn small business cash flow management tools than from a strategic CFO like Harrington Strategic Partners?

Stay ahead of the game and download my guide, 6 Mistakes Every Small Business Owner Needs To Avoid.

1. Utilize (But Don’t Fully Rely On) Accounting Software

Did you know you can automate almost all of your transactions with basic accounting software like QuickBooks? I’m talking about sales, refunds, customer payments, vendor bills and payments, debit and credit card charges, bank fees, loan payments, amortizations, and more!

Are you thinking, “Whoa! I thought transactions were just about ringing up a customer at the cash register?”

If so, that’s totally OK. You’re here to learn, remember?

Back to automation. If you’re brand new or even familiar with QuickBooks, you’ll notice there are tons of features. You likely don’t need every single one and attempting to integrate more than you need will only make everything more confusing. 

Instead, utilize the features that work for your business’s transactions and automate everything you can. With automation, you can import transactions and set rules to ensure everything is coded correctly. You can even set up recurring transactions so you don’t have to manually enter them every month. 

But here’s the thing, you never want to automate your software only to walk away. You still need to review and confirm every transaction. Moreover, you want to think of accounting software as a tool – not the end-all-be-all. Continue to reconcile your books and stay abreast of all the inner workings of your business’s finances. 

When you put this into practice, it will save you hours and will significantly improve the quality of your cash flow. 

2. Train Your Clients

The key takeaway from cash flow management is you need more money coming in than going out. What better way to improve your cash flow than have your clients pay you on time?

If you give off the vibe that you’re OK with late payments, your clients will take advantage – trust me.

Rather than dilly dally around invoices, send them promptly. When your clients sense your urgency, they will be more likely to prioritize your payment.

Invoicing programs, like Due and Invoice Ninja, will even send automatic payment reminders. Take it a step further by including one-click payment options to make it super easy for clients to pay their invoices. You can do this in QuickBooks, too!

When you remove excuses of forgetfulness and complications with user-friendly invoicing software, you'll have money sitting in the bank and earning interest for longer periods of time. 

3. Closely Manage Your Inventory

A common mistake small business owners make is investing in too much inventory. 

Sounds a little counterintuitive, right?

From a cash flow standpoint, too much inventory can be a small business financial killer. You see, your inventory ties up cash in tangible items. While you will (hopefully) need that excess inventory down the line, you need positive cash flow now to pay expenses, contribute to your rainy day fund, set aside for tax payments, and so on. 

So take advantage of smart tools to only order the inventory your business needs to operate smoothly. For instance, you can track your inventory levels in real time, set up reorder alerts when something is running low, or even utilize tools that will base your inventory orders on sales amounts and frequency. 

When strategically managing your inventory, you’ll keep the cash flowing for your business’s needs.

4. Don’t Pay Your Bills Early Or All At The Same Time

Packing all your expense payments on the same day may seem like the easiest thing to do. But it’s actually terrible for your cash flow.

First of all, the longer cash is available – the more interest that cash earns. Therefore, you don’t want to pay bills a day earlier than necessary. It’s better to make your payments as late as possible without incurring late fees. 

Next, and for similar reasons as above, don’t try to take a shortcut by paying all your bills at the same time. Doing so can drain your cash and potentially jeopardize relationships with suppliers if you cannot pay an important invoice.

Instead, sort your expenses and prioritize the most important, such as rent and payroll. Stagger the less important or more flexible invoices to pay later in the month. This will help you keep interest-earning cash in the bank and you out of a complicated bind should an unexpected expense arise. 

5. Be Strategic With Your Payroll

There isn’t a one-size-fits-all payroll solution. The best payroll solution for the small business across the street may not be ideal for your business. 

For instance, a bi-monthly cycle (paying twice a month) equals 24 pay cycles per year. A bi-weekly cycle (same day every other week) equals 26 pay cycles. Fewer pay cycles save you the cost of 2 pay cycles each year. But more frequent pay cycles allow for smaller paychecks each cycle. 

Furthermore, some businesses with slower revenue streams opt for monthly pay cycles – provided it is permitted by applicable wage and hour law limits.

What’s important here is to know you have options. Choosing the best payroll solution for your small business will be determined by your cash flow details. 

Download my guide, 6 Mistakes Every Small Business Owner Needs To Avoid, and keep your small business growing successfully.

6. Monitor & Reduce Your Cash Outflow

Schitt’s Creek fans may laugh about David Rose justifying frivolous purchases to his father as “It’s a write off!”

But in reality, this behavior can be a major problem for small businesses. It is so important to consistently monitor and reduce your cash outflow if you want to position your business for long-term sustainable success. 

Here are some cash flow-reducing strategies used by successful small businesses:

Repair, Not Replace

You know that fancy, expensive capital equipment that’s been giving you problems? While completely replacing it sounds nice and you can “write it off” come tax time, it will still put a dent in your very important cash flow. You are better off investing in lower-costing maintenance and repairs instead of replacements. 

Lease, Don’t Buy

If your small business requires expensive, specialized equipment, remember that you don’t have to buy it. Instead, you can lease it. This can be beneficial for a few reasons.

First, the lower cost of leasing is better for cash flow. Second, make sure your contract stipulates that the owner of your leased equipment will handle any and all necessary repairs – again, saving you money. Third, equipment depreciates over time – so why invest in something that won’t give you a return?

Hold Off On Upgrades

The latest and greatest equipment and software sounds great. 

But you have to ask yourself, is it a need or a want?

Be realistic and reasonable about your business expenses. Put off upgrading your products until it is a necessity – not a desire. 

Negotiate With Vendors

Put in the effort to build relationships with your vendors. You could open up buying options, payment terms, and even discounts.

Want Better Cash Flow Management Tools For Your Business?

Getting familiar with cash flow management tools for your small business is a great foundation for your business’s future success. But did you know there are a lot more tools, tips, and functions you can utilize to reach your goals more efficiently?

From avoiding common mistakes to setting your business up to scale, there may be a lot left for you to learn. The good news is that you don’t have to do it alone. In fact, I can help!

Download my guide, 6 Mistakes Every Business Owner Needs To Avoid, to learn more.