Tips to Manage Your Business Cash Flow

The #1 obstacle for small business owners is managing cash flow but with careful planning, discipline, and good financial management tools you can get over the hurdle much easier.

At times, it can be difficult for a growing business to decrease the lag between the time you have to pay your suppliers and employees and the time you have to collect receivables from your customers. It all falls back on practicing good cash flow management. This simply means delaying expenses as long as possible while encouraging anyone who owes you money to pay as quickly as possible. Practicing careful cash flow management will allow a business to estimate the amount of cash it will have on hand at any given time, project trends in cash inflow and outflow, and plan for any potential shortfalls or surpluses in cash.

Fidelity Bank’s VP and Business Services Manager, Sharon Mullaney, stressed the importance of having a professional banker come into your business to perform a full analysis of cash flow. This will help you create a plan to keep track of the money coming in and out of your growing business. Here are a few examples of what a business services professional will look at:

• How are you collecting your customer’s payments?
• Who are your payments coming from?
• What types of payments do you accept? (Cash, debit, credit, etc.)
• How quickly are you receiving those payments?
• How much cash do you have on hand?
• Do you have a slow season?
• Are you having trouble paying vendors and employees?
• How are you currently measuring your cash flow?

From the business analysis, the professional will be able to recommend various tools and services to help with cash flow. Until those tools are implemented, here are a few tips to improve receivables and manage payables:

• Offer discounts to customers who pay their bills rapidly.
• Ask customers to make a deposit payment at the time the order is taken.
• Get rid of outdated inventory for whatever you can get.
• Promptly issue invoices and immediately follow up if payments are slow.
• Take advantage of creditor payment terms. If a payment is due in 30 days, don’t pay it in 15 days.
• Communicate with your suppliers. They will need your trust and understanding if you are ever in a situation where you need to delay a payment.

For more information on cash flow management, call or visit any one of our Fidelity Bank branches.