10 Tips For Better Small Business Cash Management

Cash flow management is one of the most critical aspects of running a small business. Good cash flow is how you keep your business afloat; it’s the first thing you need to look at when the books aren’t showing what you want them to show, and it’s how you’ll keep your staff and clients happy. It stands to reason, then, that if you want to improve your day-to-day business operations, you should also want to improve your cash management. Here are 10 tips to help you do just that.

1. Keep your books honest

We don’t mean that you shouldn’t engage in any criminal activity when it comes to cash flow (although that should obviously go without saying). Rather, we’re saying that you need to make sure every transaction involving money in your business is accurately logged and recorded. Even one slip-up in this regard could cause serious problems down the line; if cash isn’t accounted for, you could be missing out on an important resource, but if you overestimate, your business could be in more trouble than it seems.

2. Don’t be afraid to use your own money

If your business is experiencing cash flow problems, there’s absolutely no shame in injecting a little of your own cash to help it weather the storm. Your cash problems might not even be long-term, in which case, you should consider hitting up some short term loans to build your reserves a little or to pull you out of a tight spot. This isn’t a suitable solution for protracted money problems, but it is great for a momentary market downturn, for example.

3. Chase invoices

It’s very important that you chase invoices whenever you submit them to a client. Not only does this reinforce your worth as a profit-making business, but it’s also important because clients can often forget – either deliberately or accidentally – that they’re due to pay an invoice. While most clients will likely be scrupulous enough to pay you on time, others may try to defer or delay it, so it’s on you to chase invoices and make sure your payments are up to date.

4. Examine your cash flow constantly

It’s difficult to know how to adequately manage your cash flow if you don’t keep track of it. You should hold regular audits so that you know exactly what the state of your business is. These don’t have to be frequent; you could hold them every month, every quarter, or even every year (although we recommend checking up on cash flow more often than this). As long as you’re keeping track of what’s going on, you should be able to stay on top of things.

5. Thoroughly research clients and partners

Sometimes, it’s not a good idea to enter into a partnership with a business or to take a certain organisation on as a client. You can’t know whether this is the case until you’ve done your research, though, so be sure to thoroughly examine every potential partner and business interest before you enter into any contracts. If you don’t do your research, you might end up falling foul of a potentially disadvantageous deal, meaning your cash flow is severely impacted.

6. Keep a rainy day fund

When your business is riding high, you should make sure to squirrel away just a little cash each month. A business savings account is a great way to make sure your business can weather anything life throws its way, and when cash flow starts to dry up, you can inject a little cash from your savings to keep everything running. Again, this isn’t going to be a great long-term solution, because it’s better for a business to be consistently making money, but it’ll certainly do in a pinch.

7. Hire professionals

Perhaps cash flow simply isn’t your strong suit. That’s fine; business leaders can have a wide variety of different skills and specialisations, and you don’t need to be a jack of all trades to achieve success. However, cash flow is vital, so you should make sure to hire an accountant or an expert who can examine your finances and keep you informed as to their status. Just because you aren’t an expert in the financial side of things, that doesn’t mean you don’t still need to bear this aspect of your business in mind.

8. Buy small, sell big

To improve cash flow, you should bolster your profit margins. Again, this might sound obvious, but the ideal business is one that sells a product or service customers need while making a tidy profit for itself. To do this, try to identify niches within your industry that are underserved, then look for products or services you can sell that will fill that niche. Try to make sure those products aren’t costing you too much, and conduct market research to ensure you’re not overcharging when compared to your competitors.

9. Make cutbacks

No business owner likes to make cuts, but sometimes it’s necessary if you’re going to maintain positive cash flow. Don’t start with cutting staff; instead, closely examine all of your business spending and see if there are any areas you could make cuts. A lot of smaller reductions will add up over time, so try this first, and if you really can’t balance the books, that’s when it’s time to start making bigger concessions. At all times, make sure to be honest with your staff about what’s happening. 

10. Hire great staff

The lifeblood of any business operation is its staff. If your business is in a position where it’s financially viable to make additional hires, you need to make sure those people are excellent within their field. This will contribute to cash flow significantly because the more efficiently and skilfully people work, the more chance they have of bringing in money for your organisation. Every aspect of the hiring process, from the interview stage to the initial welcome, needs to be perfect if you want to attract great people.