Tips to Manage Your Small Business Cash Flow

It’s no lie that if you want to make money, you need to spend money. Imagine your business’ cash flow as a digestive tract. The capital your business feeds on gets dispersed into smaller reserves that go towards funding your essential components.

Successful business thrive when their generated income is used to improve their brand.  Listed below are a few ways you can manage your small business’ cash flow.

Your Breakeven Point

Any business below their earning potential after expenses is considered “In the red.”. The opposite, “in the black,” refers to a company that meets their expenses and exceeds them.

The moment you switch from red to black is when you should establish a breakeven point. The breakeven point is the high water mark that will dictate how your company grows. Review monthly expenses to avoid your cash flow from going beneath that line. Create records of your profits and losses and consult an accountant if you have any financial questions that you are unsure of.

Faster Payment

Getting paid for your work is always a moment to be celebrated.  But, accepting payment is also permission to end one task and move on to another important matter. Just as your customers depend on your timely services, you depend on their timely payments.

Let your customers know where you stand on paying invoices. Your invoices should indicate a clear date for when you wish to receive payment. If either partial or no amount is paid by the date, continue to notify them. Hire a collection agency, as a last resort. Only specialty or custom orders should be paid in installments.  

Create effective discounts and giveaways to well paying customers. Offer a 5% discount to any customers who clear a payment within a 10-day period.     

Attend to Equipment When Needed

Every business needs to update their tech to produce more. Equipment, such as computers, software, and printers, takes up the most space and capital in your office. These items may work for now, but you’ll want to repair or replace them when they don’t.

The cost of repairs can double your expenses unless you turn it around. If you have a good history with a local repair business, then you can work out a deal with them. Determine which programs are still compatible with your systems. Avoid replacing familiar tools with flashier ones you barely understand.

Put old hardware up for sale if you have to get rid of it. There are companies that deal in gently used office equipment. You might be able to consider a trade towards the value of a newer item for half the book value.   

Keeping Your Cash Ready

Setting aside reserves should factor in unexpected events. In case of emergencies, it’s best to have a supply of cash at hand.

Companies usually keep petty cash for expenses below an amount payable by check. Access is restricted to office related expenses such as a catered lunch or reimbursements. Receipts and invoices should be collected for reconciliations.