cash flow management

6 Steps toward Better Cash Flow Management

Successfully managing cash flow can mean the difference between stagnation and growth.


For small businesses, successfully managing cash flow can mean the difference between stagnation and growth.

Cash flow management—tracking the movement of money in and out of your business—can be one of the most challenging aspects of running a business. Successfully managing cash flow involves balancing short-term needs against long-term plans, and accounting for irregularities in inflow and outflow. For small businesses aiming to expand and grow, cash flow management can be especially tricky.

It should come as no surprise that 60% of small business owners around the world say cash flow has been a problem for their business at some point, according to a recent survey. Of those, about three-quarters say that cash flow problems are among the top three causes of stress.

The 2021 State of Small Business Payments and Cash Flow report, released by Intuit QuickBooks.

Cash flow problems don’t just create headaches for business owners—they also have major consequences that could significantly impact the overall health of your business. These include:

  • Negative impact on growth
  • Inability to take on new projects
  • Missed opportunities for capital investments
  • Inability to cover payroll
  • Inability to offer employee raises
  • Damage to supplier relationships

The good news is that there are a variety of tools and tactics you can use to help you better manage your business’s never-ending cash flow challenge.

As small businesses begin to grow, cash management often becomes more complex, catching many business owners off guard. Among business owners who experienced cash flow problems, 44% said these problems came as a surprise.

Bookkeeping software programs that offer historical tracking capabilities can help you identify patterns and avoid running into sudden difficulties. You can use these tools to look back over the year to detect sales spikes and dips, contract and payment patterns and other cyclical cash flow issues.

Seasonality—predictable variations in sales throughout the course of the year—affects a wide variety of small businesses. Landscaping companies do more business in the warmer months, and accounting firms get inundated around tax time, to take two well-known examples.

Seasonality can also impact small businesses in less obvious ways. For example, companies with government contracts may find that the June 30 fiscal year-end of many government agencies affects their cash flow. Other businesses may need to invest in inventory or other expenses at certain times of the year. Planning for cost spikes can help you balance out cash flow throughout the year.

Review the cash coming into and going out of the business regularly—at least once a month—so you always know where the financial health of your company stands. Use the patterns and trends you identify to make sure you have cash available when your business runs the risk of being low on funds.

Keeping a handle on expenses is essential to good cash flow management. There are a few tactics you can use to optimize the money flowing out of your business.

Start by regularly reviewing your business’s profit and loss statement. Keep an especially close eye on expenses that are likely to have the greatest variation—supplies, for example. Repairs and maintenance costs can also vary a good deal monthly for many businesses.

Next, look for opportunities to cut expenses or improve terms with suppliers. If you want more payment flexibility, try negotiating for longer terms—60 days instead of immediate or 30 days, for example.

Finally, consider automating payments so you’re paying bills at the optimal due date for your business. Electronic payment tools can help you reduce expenses and avoid late fees.

Invoicing a customer for products or services is one thing. Actually collecting money from that customer is another thing altogether—and more than a quarter of small business owners say not getting paid according to the agreed-upon terms is a primary contributor to cash flow problems. Fortunately, you can take steps to reduce the chances of this happening.

Start by reviewing your invoicing processes to ensure your business is getting invoices out the door immediately rather than invoicing once or twice per month.

In some industries, it’s standard to require deposits and/or milestone payments for big projects or orders. Don’t hesitate to ask for these if appropriate. Online tools can help you stay on top of invoices by sending automatic statements and payment reminders. When you encounter late receivables, follow up proactively and avoid letting any customer run up a large unpaid balance.

Finally, if you don’t already accept credit cards and mobile payments, set your business up to accept different forms of digital payments. Many customers will pay more quickly when these options are available. In today’s business environment, it’s essential to accept payments according to the way customers want to pay you.

Cash reserves are a key indicator of financial health and can help your business shoulder big, unexpected expenses. Over a quarter of small business owners impacted by cash flow issues say that not having a cash reserve was the primary reason they struggled with cash flow.

Build cash reserves by planning to contribute a certain percentage of cash inflow each month and treating those contributions as fixed expenses. A good rule of thumb is to keep three to six months of operating expenses on hand.


A credit history can help your business gain access to credit resources that can help smooth out cash flow throughout the year. Start lining up credit resources—for example, a line of credit or a business credit card—before they are needed. That way, you’ll be able to use them as necessary to maintain an even cash flow. Be aware that some forms of credit may require personal guarantees. And be sure to acquire a D-U-N-S number—a nine-digit number that helps potential lenders and partners easily access your business credit profile.

Business credit cards sometimes have other benefits beyond easy access to payment. They can help you organize business expenses, and some offer reward points that can ultimately help offset costs. Research cards and, if possible, choose one with rewards that specifically help your business. For example, if your business involves a lot of travel, you may be interested in a travel business credit card that could result in reduced or free flights.

It can be tempting to take on any new customer that comes along—but be aware that when it comes to cash flow, not all opportunities are created equal. Take a moment before agreeing to do business with new customers to make sure they have a solid track record. Check their business credit, if appropriate, and consider asking for money upfront and/or in milestone payments to limit exposure to risk.

Managing cash flow doesn’t have to be daunting. By creating the right systems and using the tools and resources available, cash flow management can become a well-integrated part of your company’s operations. Over time, you’ll better understand the financial health of your business, giving it a better chance to thrive and grow.


Manage Cash Flow

Positive cash flow is critical to your short- and long-term financial success. Check out our resources that help you effectively manage your cash flow. Learn more about managing cash flow.

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This article is for informational purposes. It is not designed or intended to provide financial, tax, legal, investment, accounting, or other professional advice since such advice always requires consideration of individual circumstances. Please consult with the professionals of your choice to discuss your situation.