Business Daily Media

Five tips to manage cash flow for your small business

  • Written by News Company


According to a study, as many as 82 percent of the businesses that shutdown in the US, cite cash flow problems as the biggest reason for their failure. It is then evident that no matter how profitable a business model is, every company has to make sure that they have a steady and profitable cash flow to ensure that those plans work for them. This dependence on positive cash flow is notably stronger in small businesses. For such small-sized companies, the following strategies are considered useful.

Debtor Financing

This concept of debtor finance is an umbrella term for different financial tools such as invoice finance, cash flow finance, selective factoring, invoice discounting etc. In simple terms, debtor financing is about securing cash flow in the business by using accounts receivables as collaterals. This method is especially useful for small companies where regular cash flow is critical to the survival of the unit.

Discounts for prompt payers

Even a small percentage of cash-back makes a lot of difference in the business. When you offer such a discount programme for your clients, they will be encouraged to pay as soon as they can to save money. This trick will also be useful for you to identify slow-paying clients. If your seller has any such incentive programme, you should consider taking up the offer, but only after making sure that you will have sufficient funds left for the rest of that period.

Managing idle cash

Cash lying idle is an under-utilised asset. If you have any such reserves, it is best to consult a professional treasury management expert on getting the best out of this fund. There are different ways to manage this reserve. For example, you can consider putting them in a high-paying bank account or bonds. In any case, you want this reserve to keep earning interest for you. Keep in mind that any solution should suit your liquidity needs, so do not lock it away for a long time.

Managing old equipment

You can eliminate costly repairs on equipment by setting up a regular maintenance programme for them. Even though repairs are more beneficial to cash flow management than buying new ones, there are times when the company has to decide whether selling the equipment is a better proposal.

Maintenance of non-functioning assets is not only a burden on the cash flow but also a lock on the capital which could have utilised for other productive transactions. Additionally, these things take up a lot of floor/office space, thereby becoming a hindrance to everyone.

Anticipate low reserves

Sudden expenses are standard in every business model, but they hit small businesses harder. While no one can predict them accurately, it would be wise to accept that challenging days are a reality and it is essential to be prepared for them as much as one can. With some discipline, try to set aside some amount every month in an emergency fund. You could also arrange for a line of credit for such times.

Aside from ensuring constant cash flow into your company, insurance is another important factor that is often overlooked. You can compare professional indemnity insurance policies today with iSelect.


Start your own business with Shopify


Keep on Trucking: 7 Different Types of Truck Drivers

Are you thinking of becoming a truck driver, but aren't sure which type to become? Did you know that 8.9 million people in the U.S. have a job in ...

Business Training

The age of informed action is beckoning, and it is vital for business leaders to prepare

With the embers of the pandemic still very much alight in the ANZ region, hybrid work is the norm - office hours are being reshaped and data has g...

Business Training

Creating an Inviting Office Space for Your Employees

As the workplace continues to evolve, employers are looking for ways to create an inviting office space for their employees. By creating a space that ...

Business Training

Navigate Agile Certifications for Project Management Professionals

Agile methodology is increasingly relevant for individuals and organizations seeking to stay ahead in an ever-evolving digital landscape. This set of ...

Business Training

5 most damaging blunders businesses are making

One of Australia’s leading online media agencies, Search Results, has released a list of the 5 most damaging blunders businesses are making today.   S...

Business Training

How To Keep Your New Extension Clean And Presentable

Making the most of your home without having to move is actually a lot easier than you think. You don’t have to leave your family home just because y...

Property