How small businesses can best manage cash flow

Cash flow management is critical to success for small businesses but this is also an area where many struggle which can have a big impact on the company. Having a higher amount of money coming into the business than going out towards expenses is positive cash flow, but how can you achieve this and what are the common issues?

Managing Inventory

Effective inventory management will help to keep the business running smoothly while also allowing a small business to achieve positive cash flow. Smart tools and inventory management software can enable a business to keep inventory as low as possible at all times while still being able to keep up with demand. 

Spreading Expenses

There will be a number of regular expenses that you incur and these will be unavoidable, but one which to improve cash flow is to spread the expenses out as much as possible so that all payments do not leave accounts at the same time. You can do this by setting up digital payments on online banking and making payments across a month (but make sure that they are always made on time).

Business Cash Advance

When you need access to capital whether this is for new equipment, investing in advertising or anything else, a business cash advance can be a better solution than a business loan as a cash advance is where your advance is based on future credit and debit card sales. This means that you will repay through a pre-agreed percentage of your card transactions. This means that you only pay back when your business earns which will allow you to maintain healthy cash flow.

Get Paid on Time

You do not want to get into a habit of receiving late payments and you can avoid this by invoicing customers immediately and by using invoicing software which allows you to send automatic payment reminders. 

Make Payments as Late as Possible

Sending payments at the last possible moment ensures that there is more cash available and that you are earning interest. You, obviously, want to avoid paying late which will see you incur fees so it is a smart idea to set up automatic payments for the final day that they are due.

Try a few of these strategies and it should help your small business to overcome common issues relating to cash flow. This can be a challenging area as a new and/or smaller business but when you are intelligent with the money coming in and leaving the business it will help you to achieve positive cash flow and find financial success.