How to Manage Cash Flow in Small Businesses?

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As a business owner, soon after starting a business, you become very familiar with the crucial role that money plays its success. Without it, you won’t be able to get anything done, and trying to have a positive cash flow is one of the hardest tasks to keep under control, especially for a small business. Cash flow represents the operating amount of capital you have to work with on a daily basis and most things you do, from paying suppliers and employees to your ability to provide good products and services, are highly dependent on it.

In order to help you get on the right path, today we are going to take a look at ways to manage cash flow in a small business.

Cash Flow

Start planning ahead

While trying to plan out your finances ahead of time can be really challenging because of the many unpredictable factors that can impact your business, it’s nonetheless a great place to get started. Firstly, it will allow you to get an overview of your expenses, which are most likely the primary reason you are suffering from negative cash flow.

Try eliminating unneeded expenses you see occurring on a regular basis and if that doesn’t do the trick, you may need to look into cutting other costs as well. This will help you free up some extra capital that will give you some leeway when managing the situation. Keep in mind that it’s better to make a few sacrifices than to lose your entire business. You will always be able to get things back to the way they were once your issues are properly dealt with.

On top of this, planning ahead will help you anticipate the needs of your company for the near future, allowing you to distribute your funds accordingly.

Focus on increasing revenue

While cutting costs is definitely vital for cash flow management, it’s important not to forget the bigger picture as well. The primary goal of any business is to make a profit, mostly by increasing revenue. So, if you make too many cuts, you can threaten the growth of your business and therefore reduce the amount of revenue coming in.

Making the decision between increasing revenue and cutting costs is by no means an easy one. It will be highly dependent on many factors, including the state of the markets and your current possibilities as a business.

However, there are a few things you can do without spending too much money.

For example, making sure that your current clients are satisfied is one of them as it will help you boost sales. Furthermore, building your reputation as a business that treats its customers well will give you some natural marketing, attracting new customers in the process.

Look for outside help

If things start looking really bad, seeking outside help in the form of a loan can always be a good idea. While taking out a loan may sound like a short term fix that you will have to pay for later, if you do it responsibly and with the right creditors, you can overcome current cash flow problems without digging a hole for your future self.

Another problem that may be impacting your ability to manage your cash flow is that your customers just take too much time to pay you for the goods they received. While you can try to give them incentives such as discounts to get them to pay earlier, a much more reliable solution for small businesses is to look into debtor finance options like factoring.

Simply, factoring will give your business a line of credit that is secured against the money your customers owe you. This will allow you to get up to 80% of the money you are owed and the rest when the customers pay what they owe.

Talk to your vendors

If you are struggling with cash flow, there’s no reason to pay your payables on time unless you are incentivized to do so. However, before you start doing it, you should first try and talk to your vendors and explain the situation you are in. See if you can redefine the way you pay them by making payments yearly or quarterly instead of monthly, freeing up money in the process. They may even allow you to just pay later or even give you a discount, which is much better than putting your relationship with them in jeopardy.


Whether you like it or not, good management of money is a key ingredient to any successful business endeavour and learning how to do it properly is one of the most important things you need to have a grasp of in order to become a successful business owner.

The ideas mentioned here are a few you can always turn to when you need help in managing your cash flow, but there are many others that can be good for a specific situation you are facing. With that being said, the key to successfully managing cash flow is in aiming to always keep it under control, rather than to fix issues as they pop up.

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