5 Cash Flow Management Tips For Small Business Owners

When you own a small business, it’s thrilling to see the cash finally flowing in. But making a profit doesn’t always amount to having a successful business, or even staying afloat. Good cash flow management ensures that your business will have more cash flowing in than out, so you always have money to pay for employee salaries, materials and unexpected expenses.

1. Know Your Break-Even Point

It can take years for a small business to break-even, and if you don’t know what it will take for that to happen, you won’t notice when it’s taking longer than it should. Once you know what point your business will start to become profitable, you can adjust your cash flow management accordingly to help you get there.

2. Collect Payments Sooner

Profitable companies have trouble maintaining positive cash flow when their customers or clients take long to pay invoices. Your small business may be profitable on paper, making more than enough sales to turn a profit, but it will flounder if you’re forever chasing clients to pay. The delay in payments makes it difficult to cover expenses that you’ll incur as you continue to fulfill orders. Offer discounts or special deals to customers that pay early, or reconsider your payment terms.

3. Delay Big Purchases

If you’re eyeing a new piece of equipment, make a plan to purchase it in the future, even if you feel you do have the cash to purchase it right away. That cash can be used to cover other expenses in the meantime. Sometimes, you’ll discover a better deal on the same piece of equipment, or you’ll discover your business does not need it after all.

4. Stop Using Spreadsheets For Cash Flow Management

From day one, invest in professional software like QuickBooks to track your small business’ financial data. You should also work with a seasoned CPA, who will be able to use the cloud-based software to easily work with you and your team, with all of your data in one place.

5. Change Payment Plans With Your Suppliers

Getting credit with your suppliers, or paying on net-30 or net-90 terms, will improve your cash flow. Your suppliers will be more open to longer payment periods if you have been working with them for a while, and have proven your business to be trustworthy by always paying invoices on time. Having a good relationship with your suppliers is just as important, so continue to pay in a timely matter.