Strategies for Successful Cash Flow Management

One of the first lessons you learn as the CEO of a small business is the importance of maintaining a strong hold on your finances. Commanding any entrepreneurial venture and managing a tight team of professionals leaves little room for financial mistakes or miscalculations, so every opportunity to understand and avoid risks is golden.

Luckily, there are plenty of ways to increase visibility surrounding your cash flow, giving your organization the clarity it needs to achieve your short and long-term goals. In this article, we’ll explore methods to optimize your cash flow management strategy, and learn about the major growth benefits this practice secures for your small business.

Cash Flow Management: An Essential Practice

It can be easy to assume that large corporations with seemingly endless resources are less likely to come face-to-face with money troubles. In reality, no business is free from the possibility of financial strain — and whether you’re a startup or an industry giant, cash flow errors lead to much bigger problems down the road.

On the other hand, knowing where your funds are and where they are going at any given time puts the power in your organization’s hands in a few key ways:

  • Keep Up with Competitors: As market trends change and customer preferences shift, you’ll want the financial means to adjust your own business strategies to stay competitive.
  • Maintain Financial Flexibility: A cash flow strategy helps you avoid a situation where you have payables due and not enough receivables have come in to cover those previous investments.
  • Expand Intelligently: Pursue potential growth opportunities while maintaining good credit and providing for your employees.

Smart Methods for Managing Cash Flow 

Want to create a better cash flow environment for your business — without increasing prices or cutting necessary costs? As an alternative to these unsavory measures, consciously timing your payables and receivables can ensure you always have the funds needed to keep your accounts in good standing and your employees satisfied.

Incentivize a Helpful Customer Base 

Having your customer receivables in the books as early as possible will keep the cash in your court and make it easier to take care of upcoming payables. Incentivize early payments for goods and services by offering discounts, such as annual plans with reduced price points compared to the monthly options.

Time Your Bill Payments Appropriately 

In an effort to keep on track with upcoming expenses, some business leaders may feel the need to submit their payments weeks in advance. However, paying bills is the one area where it’s actually better to skip the early bird tactics.

Unless there is a discount for those who pay ahead, pay your bills when they are due, not earlier. This will allow your team to schedule with as much leeway as possible and create better cash flow possibilities.

Create Stable Conditions for Major Purchases

When it comes time to invest in your business, you’ll likely already be prepared to shell out a bit more than usual for the sake of your long-term success. But in order to ensure that you’re paying as fair a price as possible, you can take extra steps:

  • Only finance major expenditures after carefully reviewing the terms of the purchase (possibly with the help of a financial professional).
  • Evaluate whether it would be in your best interest to lease the new asset instead of buying it outright — while leasing is usually more expensive in the long run, this option also improves cash flow by allowing you to pay in digestible increments.
  • In today’s changing economic climate, it’s best to get clear on whether the purchase is absolutely necessary for the ongoing health of your business before making the jump.

Use Credit Benefits

In general, electronic payments are the stronger option for small businesses because the ability to send and receive instantly gives your team a longer timespan to complete the billing cycle. In addition, many modern credit options come with redeemable reward systems. Choosing the business credit card options with these rewards in their contracts could give you access to perks that you wouldn’t have otherwise, like cash back for certain types of purchases, or transportation discounts.

Hire a Financial Advisor 

Finally, the task of keeping on top of your payables and receivables each quarter or year can be a large ask for any small business CEO. Outsourcing a financial service provider with a team of Certified Financial Planners (CFPs) saves time each day for the other equally important tasks involved in running your organization.

With years of experience creating pricing strategies, reviewing investment contracts, optimizing resource allocation and usage, completing cost management and profitability analyses, and more, financial advisory services maintain the CEO’s decision-making control while giving them priceless insight and expertise for intuitive cost management.

Take Control of Your Cash Flow With Chesapeake Growth Network

Matt Brady, CPA, and his team at BradyRenner CPAs offer critical resources for all facets of financial management for small businesses. As part of the Chesapeake Growth Network, they contribute their financial expertise to a premier advisory partnership that represents the combined prowess of accountants, financial advisors, and attorneys, and serves the Chesapeake Corridor and surrounding areas with valuable guidance and professional services.

Contact Chesapeake Growth Network today to learn more about the wide range of financial advisory services available for small businesses like yours. Keep an eye out for our next article, which will explore key estate planning documents and provide resources for completing each one.

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