Business Cash Flow Management

9 Strategies for Effective Business Cash Flow Management

Did you know that one of the most common reasons why new businesses fail is poor cash flow management? The concept of cash flow can be defined as the total amount of cash and cash-equivalents moving in and out of your business during a defined period of time and is typically calculated on a monthly basis. In turn, cash flow management refers to the process of tracking and analyzing changes to the amount of money is being transferred into and out of your business. Positive cash flow refers to your business receiving more cash than it has been paying out. In contrast, negative cash flow refers to your business transferring out more cash than receiving.

Maintaining positive cash flow is essential for businesses of all sizes since it ensures that you will have sufficient funds for paying your employees’ salaries, as well as the necessary taxes and bills while having also enough resources to grow and expand your business. In this article, we will discuss some of the most effective strategies for cash flow management.

1. Monitor Your Cash Flow

Regularly monitoring your cash flow is an effective strategy for managing the cash flow of your business. Keeping a cash flow worksheet can help you evaluate your cash inflows and outflows, as well as to create cash flow forecasts for the upcoming months and even years. To create your cash flow worksheet, you can find many free cash flow templates online. To create your cash flow projection, add the cash you have available at the beginning of each period (such as a month) to other cash you will receive from various sources, such as customer payments, service fees, interest earnings, and so on.

The next step involves calculating your total cash outflows, such as inventory, equipment purchases, rent, employees’ salaries and wages, taxes, and other necessary expenses.  Subtracting your total expenses from your total cash will help you calculate your total monthly income. Rolling over this balance into the next month and repeating the process can help you create a detailed overview of your projected cash flow for the upcoming months.  

Business Cash Flow Management


2. Prioritize Cash Flow Over Profit

 Consistent positive cash flow is essential to the survival of any business, and it also directly translates into profit. Focusing solely on the profit of your business can be misleading since a significant part of the profit is often tied up in receivables. Therefore, it is important to focus on cash flow over profit in order to determine how much cash you will need to finance your operating expenses.

3. Improve Your Receivables

Managing and improving your receivables is one of the most effective ways to improve your cash flow. Increasing the speed with which you transform your inventory into receivables, and receivables into cash can help to resolve cash flow problems. Often, customers will take their time with payments, especially if it says “due in 30 days” on your invoices.

To ensure that payment is made in a timely manner, you should issue invoices immediately and use the “due upon receipt” approach. It is also important to contact your customers periodically to collect payments in order to collect your receivables in a timely manner. Offering your customers incentives or discounts for early payment is another strategy to improve your receivables. In addition, you can establish an official set of rules to determine your customers’ credit eligibility. 

4. Extend Your Payables

While improving your receivables, you should also evaluate your payables and make an effort to extend them to net-60 or net-90 if possible. Extending your payables will provide you with an increased cash balance, but you should be careful to make payments on time to avoid paying late fees. Unless there is a significant incentive to pay your vendors early, you should determine how much you can extend your payables without having to pay penalties or damaging your relationship with the vendors. This strategy can help you to keep the cash in your account for as long as possible.

5. Set Aside Cash Reserves

Once you have created your cash flow forecast, you will be able to predict future expenses, which is particularly important when you operate a seasonal business. Having some working capital set aside to purchase inventory and prepare for the busy season ahead will help you prevent cash shortfalls during the off-season. Typically, it is recommended to set aside enough cash reserves for three to six months ahead. Putting aside working capital will also help to prevent cash crunches in the event of a temporary market downturn or in times of other emergencies.

Business Cash Flow Management


6. Boost Your Sales

Driving sales is one of the best ways to improve your cash flow. Even if your sales are maintained at a steady level, you can consider devising a creative campaign to improve sales and your cash flow. Some effective techniques to boost your sales include offering special incentives, implementing improved marketing strategies, and holding contests or customer appreciation events. Such initiatives will not only help you get more customers but can also improve your visibility and build your reputation. In addition, if you have inventory or equipment that is becoming obsolete, you can consider selling it at a reduced price to generate quick cash. 

Also Read: 6 Things to Remember When Starting Your own Business

7. Use Technology to Your Advantage

Did you know that you can get paid faster using mobile payment solutions? If your business sells products or services, you can ask your customers to pay on the spot using mobile apps that accept payment by debit and credit cards. You can also use technology to help you keep better track of your cash flow – using professional accounting software, as well as keeping your cash flow spreadsheets stored and organized using cloud storage for easy access.

Moreover, you can use electronic funds transfer to transfer quick payments to your vendors shortly before they are due. This way, you can retain the use of your funds for as long as possible, while avoiding lengthy processing times. Finally, you can speed up your invoicing using instant online invoice creators. They are typically free and simple to use and generate a PDF invoice you can send electronically to your customers.  

8. Secure a Cash Flow Loan

Securing a business cash flow loan from an authorized lender can help you manage unexpected expenses during the off-season. A cash flow loan is a form of unsecured borrowing often used by small businesses to finance working capital and daily operations and is later paid back using incoming cash flow.  There are four main types of cash flow loans: business lines of credit, invoice financing, short-term loans, and merchant cash advances. There is a variety of cash flow loan products available to business lenders, with each offering different terms, rates, terms, minimums.

For instance, Marketlend offers optimal lending solutions by matching businesses with investors for marketplace lending of insured and secured loans in a secure and transparent environment. It is always important to do some research to choose the type of loan which optimally suits your needs, as well as to create a detailed plan of how you will you the funding and repay the loan. When comparing your options in terms of cash flow lenders, it is recommended to choose one accredited by the Australian Financial Services to ensure transparency and accountability while minimizing any potential risks.

Business Cash Flow Management


9. Reduce Unnecessary Expenses

When improving your cash flow, it is important to minimize your unnecessary expenses. To begin this process, you should evaluate all of your recurring monthly, quarterly and annual expenses to determine if you can cut back on any of them. Are you paying too much for your utilities or rent? Or maybe you have unnecessary services or subscription you can cancel? Taking a close look at where your money is going will help you cut down on unnecessary expenses, which is an important step in improving your overall cash flow.


Cash flow management is essential to the financial management of your business. Although most businesses experience cash flow problems from time to time, there are many effective strategies business owners can adapt to manage and overcome cash flow issues. Creating and maintain a positive cash flow will help your business generate consistent profits, as well as to grow and expand. Taking steps to improve your cash flow can help you create a consistent cash flow to seize important business opportunities, as well as to cultivate the necessary agility to respond to challenges in today’s fast-paced and rapidly evolving business landscape.