Key strategies to manage your small business’s cash flow

Cash is the lifeblood of every business and running out of cash is the number one reason why small businesses fail. According to a recent survey, three out of every five businesses experience cash flow problems. The fact is that even if a business reaching their sales target, it will not be able to pay bills on time and keep doors open if it does not have enough cash in the bank.

Here are six effective cash flow management strategies which can help you manage your business’s cash flow better:

1.Accelerating your Accounts Receivable/Billing Process

 Unpaid invoices are one of the biggest cash flow challenges for small businesses. It is quite common for businesses to wait till the end of the month to invoice their customers. If you want to manage your cashflow better and avoid any possible shortages, you should consider speeding up your billing process and invoice customers immediately after the jobs are completed and orders are shipped. Some key strategies to apply are structured invoice follow ups, incentivizing customers for early payments and emailing invoices rather than physical mailing.

2.Re-evaluating your Accounts Payable process

The main purpose behind this strategic advice is to improve your cash flow by decelerating the speed at which you pay your accounts payable to vendors. A few strategies to streamline your cashflow through accounts payable process are renegotiating terms with vendors, utilizing discounts with early or on time payments. However, you would need the surety that you have enough funds for next expense in your bank account, and Cash flow forecast is a great tool to have certainty in that regard.

3.Monitoring your Expenses effectively

You should follow the 80/20 rule of your expenses which means focusing on 20% of expense items which makes up 80% of your business total expenses and should look for ways to cut back on these expenses if these are disproportionate to your sales, in comparison to your projected cash flow forecast assumptions.

4.Considering increasing Prices of your Products and Services

One of the most efficient way of increasing your cash flow is by increasing the prices for your products or services. Unfortunately, majority of small business owners feel that they will lose customers and loss share of their revenue if they raise prices. Some strategies you can build in your business could be reviewing of your pricing regularly and ensure to update with rising costs, adding value to your business’s products and services and do not compete on prices to match competition, and analysing or hire a consultant to understand impact on annual financial statements of any possible discounting strategies in progress.

5.Increasing revenue streams

Adding new revenue streams could also result in increase in positive cashflow in your business. Below are some key take away from this article if you want to increase your sales for more positive cash flow: adding new services or products, revisiting your marketing strategy such as search engine optimization to find target market and Implement ways to sell more to your customers through products/services through bundling and free trials.

6.Leasing Vs Buying Decision

If you are facing cash flow shortages in your business, it is wise to lease an equipment rather than buying it flat out. The equal monthly payments to lender are easy to forecast and do not have one-time big expense effect on a given month’s cash flow.


Hope you enjoyed this article, if you have any concerns or further questions with your business’s cash flow or profits, then book a Free Profit Diagnostic Review meeting with AAT Accounting Solutions. Please click on link below:


Anu S. Kakkar CPA

O: 9059011311

M: 2898854391