5 Creative Cash Flow Management Strategies for Your Small Business

Managing cash flow is important for any business, but it’s essential for the success of small businesses. Effectively maintaining cash flow and ensuring your financial stability can be the difference between being able to pay invoices, compensate employees and invest in your company’s growth.

What is cash flow management?

Cash flow management refers to monitoring, analyzing and controlling the inflow and outflow of cash within a business. Positive cash flow means you have more money coming in than out, and negative cash flow means more money is moving out of your business than in. The goal is to have positive cash flow so that the cash flowing in is greater than the expenses being paid.

Why is cash flow management important?

According to QuickBooks, over 60% of new small business owners say cash flow is a problem, while 44% of established businesses admit cash flow is an ongoing challenge. Cash flow management is important to ensure your business’s financial stability and avoid any financial challenges. Without proper management, your business could risk failing due to inadequate cash flow.

Cash flow management strategies

If you’re low on cash, you’ll need to figure out how to fund your expenses—and sometimes small businesses have to act creatively. Here are five strategies to improve your business’s cash flow:

1. Understand Your Cash Flow

First things first, understand your cash situation. Look at the cash inflows and outflows for the past six months to get a sense of where your business stands. You should also consider creating a cash flow forecast to anticipate future cash balances.

2. Schedule Payments

Refrain from paying all of your bills at once and draining your cash. Instead, pay your bills strategically, paying the most important bills first and staggering the rest throughout the month. And remember to pay all of your invoices on time to avoid late fees.

3. Invoice Efficiently

Send invoices as soon as you have complete work, rather than waiting until the end of the month. Urge customers to pay on time by setting up automatic reminder emails and consider offering discounts for customers who pay on time and penalties for late payments.

4. Borrow Before

Solve your cash flow problems before they happen. Create a cash reserve and borrow money when you have it, not when you need it. Securing a line of credit when you have good financial standing will help you avoid the risk of rejection during tougher financial times.

5. Utilize a Credit Card

There are several helpful ways to use a business credit card to manage your cash flow:

      • Rewards – Rewards credit cards allow you to earn cash back rewards on money your business is already spending to boost your bottom line. Depending on the card, you can also earn points or miles to maximize your purchasing power.  

      • Introductory APR – Many credit cards offer a low or 0% introductory Annual Percentage Rate (APR) on purchases and balance transfers. You won’t be charged interest on any balance you carry during the promotional period, which you can capitalize on—just be sure to pay off your balance before the introductory period ends.

      • Float Period – Almost every credit card has a float period, which is the time between when a purchase is made and when payment is due where you aren’t accruing interest. If you make a purchase on the first of the month, there can be up to 60 days until your bill is due, and you’re essentially enjoying an interest-free loan. Be sure to pay in full at the end of the float period so that you don’t wind up paying interest.

    Managing your cash flow doesn’t have to be complicated. Set your business up for success and use a combination of these strategies to significantly enhance your cash flow.

    Contact our Small Business Banking team to learn how we can help support your business.