Seven Tips for Mastering Business Cash Flow

The future looks bright for small businesses. Owners responding in a recent survey (67%) said their businesses are doing well and 73% are comfortable with current cash flow and expect higher revenues next year.1

Establishing a plan for managing cash now will help keep your business on track.

Small business cash flow management is a priority for continued success.

Effectively managing your finances is critical for small business owners. Delayed customer payments, high costs, lagging inventory and emergencies can heavily impact available cash. These tips will ensure you have access to capital when you need it.

1. Examine cash flow projections.

   What is a reasonable expectation for small business cash flow? No two companies are alike. You’ll want to evaluate your company’s receivables and payments, both current and future to determine if there’ll be adequate cash to cover your needs. Businesses typically perform monthly cash flow projects, but they can also be done weekly or even daily. SCORE offers a downloadable template to assist with the process.2
   
   If you use manual processing and spreadsheets, this is an ideal time to consider automation. You’ll have access to real-time information for better decision making.

2. Encourage customers to make faster payments.

   Consumers find digital payments fast and convenient. Digital payments, like mobile wallets, contactless and bank transfers also help expedite accounts receivable for improved small business cash flow.
   
   You might also consider offering a discount to customers who pay early. For example, a “1/10-Net 30” offer reduces customer payments by one percent if they pay within 10 days on a 30-day bill.

3. Renegotiate vendor payment terms.

   A cash flow projection will help to identify which vendors you need to pay and when. Revisit payment terms to see if the due date can be extended without incurring late fees. Delaying payments keeps cash available longer. Vendors may also reward your business with a discount for paying early or a volume discount for large purchases.

4. Effectively manage inventory.

   Whether you have an online store or physical location, managing excess inventory can tie up space, time and cash. The just-in-time (JIT) method involves stocking only enough product or supplies to fulfill orders as they come in. JIT is typically available through inventory management software. Depending on the solution you choose, you’ll not only be able to track supplies and merchandise, but also orders and sales.

5. Reduce spending.

   Cutting unnecessary expenditures improves business cash flow as well as increases reserves, providing a cushion for the future. Review your budget to determine if there are expenses your can reduce or altogether eliminate. Even minor changes can add up to significant savings.

6. Save for emergencies.

   Sound financial management includes preparing for unexpected expenses, which is much easier when your business is doing well. Experts recommend setting aside three to six months of expenses. You should also save and invest for growth opportunities.

7. Establish and protect business credit.

   There may be times when you’ll need to borrow money. Establishing a positive business credit score with a strong payment history increases credibility with lenders and makes them more likely to grant access to the funds you need. Always make timely payments and carefully monitor credit bureau reports for accuracy.

Build a strong financial foundation.

Running a thriving small business can be extremely gratifying. The right financial partner can help position your business for growth. Whether you’d like assistance with small business cash flow management or recommendations for an automated payment solution, we can help. For more information, call 1-888-SYNOVUS (1-888-796-6887) or stop by one of our local branches.