A 2 Minute Cash Flow Management Guide Every Small Business Needs

For every business, revenue is vanity, profit is sanity, but cash is king. And why not?

It is practically impossible to run and sustain a business without cash.

That’s why it is certainly important to manage the cash flow for your venture regardless of its position in the market.

Imagine spending a huge amount of cash on working capital and then falling into a financial crunch. In such a case, you might end up falling short of finances when it comes to paying your suppliers and employees.

And that is not an ideal scenario for any venture.

Remember, effective cash flow management is the only key that can prolong the survival rate of your business.

But what exactly is cash flow management all about?

In simple terms, cash flow management is all about drafting different sets of strategies and practices. These strategies further help in tracking, analyzing, and improving the financial status of your venture.

And as mentioned earlier, the process is typically important to keep your venture afloat, especially if you plan to expand your business.

Industry experts explain that successful financial management is actually balancing accounts receivable, accounts payable, and shortfalls.

If not done right, the whole process can get really challenging and overwhelming.

Thus, if you are also struggling with cash flow management, here’s something that can help you streamline the entire process. Keep reading to learn more about the tips for the same.

  • ALWAYS have an emergency cash reserve on standby

Needless to say that the business world is full of uncertainties. There’s a huge chance that you might end up encountering certain situations where you find your business in a financial crisis.

To avoid that, you can have an emergency cash reserve that can have your back during such economic downturns.

The rule of thumb is to strengthen your cash reserves to cover at least three months’ worth of expenses.

  • Have a set of timelines and terms for your invoice

For every entrepreneur, it is imperative to consider establishing clear payment terms before associating with a new client or supplier. It is better to learn about the payment and invoice expectations before signing the deal.

Many suppliers ask for an initial deposit for bulky orders and rest upon reaching certain milestones or deliverables. You need to figure out if such payment terms can work well for your venture.

But managing bills or invoices can get really complicated, especially if you have multiple chains for your venture. In such a case, you can send your invoices through third-party billing services. Such professionals compile all your bills and invoices and send them to the concerned parties.

This way, you can streamline the entire process and be at peace, knowing that all your invoices and bills are managed by professionals.

  • Cut back on unnecessary expenses

Unnecessary expenses can disrupt your cash flow management strategy right away when it comes to business.

Believe it or not, many entrepreneurs end up spending more than they are actually bringing in. And that can lead to substantial financial losses.

Thus, it would be a great idea to thoroughly examine your venture and analyze your unnecessary expenses. For instance, many businesses have shifted to work from home policy to cut back on building and other expenses.

In the end,

Effective cash flow management is important but can be a daunting task to tackle. Fortunately, you can use the tips mentioned above to make things a bit easier for you and your business.


Paul Petersen

Back to top