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My Blog

Tips for Managing Your Business Cash Flow.

 It's already the eighth month of the Year, We are gradually getting to the end of the year, and soon it will be time for Year End Reports. In our last Newsletter, We discussed the concept of Cash Flow and how it affects our Business Operations; this month, we will be looking at tips to manage our Business Cash Flow.

  Being in Business for yourself is like being an Air traffic controller, especially in the area of cash flow management ; You can imagine trying to control 100 Airplanes landing simultaneously on two runways; this can be an upheaval task, but we regularly see clients line up their monthly bills, their projected income, business projects and business expenses and try to combine all these activities, at the same time, trying to ensure a steady cash flow into the business; you can imagine, the projected outcome, if all these activities are not properly coordinated.

  Cash Flow is the heartbeat of every Business, and if a Business does not have the cash on hand to pay their vendors, they will definitely run into problems. The main Cash Flow Problem, that Business Owners face is as a result of Lack of Creative Cash Management. Below are some Tips to overcome the Ups and Downs of Cash Flow Problems in your Businesses:

1) Always Schedule All Payments: Most Business Owners line up their monthly bills, compile them, sit down and issue all the checks and set up Bill Payments at once; but the trick is to have a " Holding Pattern". It is advisable to schedule each payment, in order to get to your vendors in a timely landing, without affecting other Cash Flow activities. 
  Every Business has Three (3) tiers of Checks Disbursements Groupings:        
a) Must Pay Group- These are payments that can hurt you, either in cost or ability to operate your business, if they are not paid. These include items like Taxes, Rents, Payroll and Service Charges.
b) Important to Pay Group - These are payments, that have a reasonable grace period, and if not paid, a financial penalty can be incurred, as a result of Nonpayment. These include Utility Bills , Credit Card Payments and Insurance Payments .
c) Flexible Payment Plan Group - Suppliers, Vendors and Wholesalers, that supply most Small Businesses are the best sources of flexible credit financing. Most of them will continue to work with you, if you arrange a regular payment plan with them.

  • Tip #1: Try to schedule Payment Dates, into the Three (3) tiers of Checks Disbursements groupings and issue check/Bill payments accordingly.

2)  Make Payments on your Revenue, not on uncollected Sales : I am sure, that none of us will want to land a plane, hoping that the runway is beneath us in the fog bank, as also Business owners, it is not advisable to make projected payments on uncollected revenue. You may wander, what happens to Credit Facilities, Guess What, Most Credit Facilities still have a timeline for payment.

  • Tip #2: Always prepare your Cash Flow Statement and financial reports, and review them periodically, to have a full knowledge of your Cash Flow.

3)  Do not use Payroll Taxes to float your Business Operations: Studies have shown that most Business Owners use the Tax liabilities, collected during payroll, to float their businesses, rather than remitting the payments to the appropriate Tax Authorities. They don't realize that they spend more in potential penalties, fees , interests, time and aggravation, if they engage in this act. Tax Liabilities grow, if they are not remitted at the appropriate timing.

  •  Tip #3: Try to discipline yourself to deposit the payroll tax money collected, into a Separate Bank Account, until you are ready to remit the payments.

4)  Establish Relationships with your Credit Provider: It is very important for every business owner to plan for a rainy day. Having a great relationship with a vendor, that gives you a credit facility, avoids cash flow storms, which might bring in a sense of desperation or lack of control. 

  • Tip #4: If you work with a quality company, that provides working capital or credit facility, stick with them and build a relationship, once they know your credit worthiness, they will be there to help you quickly, in times of need.

 5)  Invest in a Good Bookkeeping/ Accounting Service: It is important for Business Owners to have a grasp of their cash flow and understand the effect on their business growth. A Good Bookkeeping service is invaluable to your business, particularly in preparing your monthly financial reports and cash flow statements, which will help you, see how your Business is doing as well as maintaining your Business Cash flow. 

  •  Tip #5: Rather than worry about how to prepare your company financials and your cash Flow Statements, as well as trying to figure out, the amount of Payroll taxes to pay; let the professionals handle it.

  Understanding and Managing Cash flow has been a challenge for many Business owners, but with the application of these tips, it is possible to grow your Business to a greater level , and also have enough funds for other activities, that will bring more revenue into your Business. 
  Please feel free to contact us on 202-422-4586, if you will need further help on how to manage your Business Cash flow and financial Reports. We will love to help you. Remember: The best time to take control of your Cash Flow is RIGHT NOW.

26 Comments to Tips for Managing Your Business Cash Flow.:

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Accountants startup business on Thursday, August 21, 2014 8:29 AM
Thanks for sharing Tips for Managing Your Business Cash Flow.
Reply to comment
Rosemary on Thursday, August 21, 2014 11:34 PM
Thank you for appreciating our efforts in sharing Great Accounting and Bookkeeping Tips; Our delight is in providing you up to date and current information, on how to manage and maintain your company's cash flow. Keep coming back for more information and you will be glad, you did.

Jesmine on Friday, March 20, 2015 4:22 AM
Good tips
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Rosemary on Wednesday, November 01, 2017 10:55 AM
Thanks for acknowledging our post. We are happy to know that it's very helpful towards you and your Business. Keep checking back for more information on improving your Business Cash Flow. Thanks.
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Thomas on Friday, August 24, 2018 8:07 AM
You have explained the cash flow nicely. I think most businesses struggle to maintain a healthy cash flow. But again, come to think of it, cash flow is directly related to sales and in turn to the sales team. If you can manage your sales team better, you can control your cash flow better. You can check this out here
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