How to Effectively Manage Cash Flow for Small Businesses

posted on Wednesday, September 23, 2020 in Financial Tips

Positive cash flow helps keep your business running. It allows you to pay debts, settle monthly bills, invest in bigger opportunities, and so on. But what exactly is positive cash flow?

This occurs when your company’s earnings start to outweigh the amount of money spent on payouts, like bills and salaries. But, to get there, you must learn the ins and outs of effective cash management. If you own a small company and are new in the industry, here are some ways to effectively manage cash flow:

Assess Your Company’s Expenses

Every few months or so, take the time to sit back and assess your company’s expenditures. Once you see the big picture, this allows you to determine in which areas you can cut back on costs. Whether it’s on services you don’t need, renegotiating monthly rent, or choosing to lease equipment, every little detail contributes to positive cash flow.

Create a Separate Account for Your Personal and Business Needs

Putting your personal and company’s finances into one account is a recipe for disaster. Imagine having to go through your statement every month, trying to decipher which transactions are business-related. By choosing to separate your business from your personal finances, you can easily track cash flow and expenses through detailed monthly and annual reports.

Accomplish Invoices Immediately

Delaying invoices can result in late payments, and in worst-case scenarios, forgotten bills. Over time, this can disrupt your business’ cash flow. Prevent it from happening by sending your invoices immediately after a service is rendered.

If you’re dealing with difficult clients who purposefully delay payments, don’t shy away from imposing penalties. If this doesn’t work for you, there are other methods you can adapt, like giving incentives for those who make early payments.

Discover the Benefits of Managing Cash Effectively

At Community 1st Credit Union, we offer cash management services that allow easy tracking, transferring of funds, paying bills in the comforts of your home, and so on. If you have questions or concerns regarding our services, call us, or leave a message on our website.