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How to Manage Your Small Business Cash Flow

Business person financial paperwork managing small business cash flow

How to Manage Your Small Business Cash Flow

Did you know that 82% of small businesses fail due to poor management of cash flow or a poor understanding of how cash flow affects the survival of the business?

As a business owner, it’s important that you understand small business cash flow management is critical. When you understand how money is coming in and going out of your business, you can make better decisions and understand your financial health.

While it can be challenging to determine the best strategies for cash flow management, it’s important if you want to have better control of your finances. If your business is located in or near Cincinnati, let Orcutt & Co help manage your finances. They specialize in monthly accounting and bookkeeping tasks, as well as payroll and tax prep. They can help you understand your cash flow and how it affects your business.

In this article, we’ll define cash flow management and provide you with 8 tips to help you with your small business cash flow management.

What is Cash Flow Management?

Before we can explain the importance of cash flow management, we must explain exactly what it is. Cash flow management is the process of managing the flow of money in and out of your business. It is used to determine changes in the money your business has in a given period. It is keeping track of the cash flow and analyzing the changes.

Regular, strategic cash flow management is critical for the overall financial health of your business, to ensure that you have the money you need to keep running. It helps you spot trends, tackle issues with cash flow before they get out of control, and helps you prepare for the future.

It also helps you determine how much money your business will have in the future and how much you need to continue operations, including paying your employees and suppliers, and managing your business debt.

Why is it important?

Cash flow management is important because it helps you determine if you have the cash you need to continue operations. It helps you map the financial status of your business and keeps you in control.

It gives you the power to define how your business will grow based on your current resources, as well as gives you time to create strategies to prevent financial distress and whether you need to make any adjustments to improve cash flow.

8 Tips for Managing Small Business Cash Flow

Below are 8 tips for managing your small business cash flow:

1. Select the best payroll cycle

Your payroll cycle should work with your revenue stream while also complying with wage and hour laws. If your business generates daily revenue, it’s easier to cover weekly payroll, but if your business has a slower revenue stream, you may want to pay bi-weekly or monthly, as long as the wage and hour laws permit it.

2. Strategically pay bills

Spread out your payments and extend payables as long as possible. Don’t pay all of your bills at the same time, as this can drain your cash reserves and jeopardize relationships with suppliers if you can’t pay. Instead, take the time to review your bills, sort them based on priority, and set up payment dates so that the important ones are paid first. Less important and flexible payments can be made later- but you should still pay on time to avoid late fees. Additionally, check to see if any of your debtors offer discounts for paying early and prioritize the ones that do.

3. Negotiate payments with suppliers

While you may feel like choosing a supplier with lower prices is a way to improve cash flow, flexible payment options may be better. Discuss payment terms with your suppliers, as you may be able to time payments with your inflows.

4. Timely collect receivables

One way to improve cash flow is to encourage quick payment of receivables. Here are some ways to do this:

  • When taking orders, request deposits
  • Offer discounts to move outdated inventory
  • Give discounts for customers who pay early
  • Offer online invoices and payment options

5. Closely manage credit policies

If you offer credit to your customers, be sure to stand firm on your policies to make sure you get the cash you need. Here’s how:

  • Promptly send invoices, verify receipt, and follow up on late payments
  • Require credit check before extending credit
  • Monitor accounts to identify late payments and implement a cash-only policy for those who are chronically late

6. Use business credit card for expenses

You can free up cash by using a business credit card for everyday expenses. You can keep track of expenses with online banking and monthly statements. Also, make sure you’re taking advantage of rewards programs to reduce expenses, such as cash back on some purchases.

7. Utilize technology to make/accept payments

You can collect receivables faster by accepting online payments and pay bills on the day they’re due with electronic payments. This will also help you keep track of your financial status.

8. Consider a line of credit

line of credit gives you access to funds when needed and can help balance your cash flow cycle. You can use it to fill the gaps between outflows and inflows, purchase equipment, cover seasonal/unexpected expenses, and take advantage of opportunities for growth.


The short- and long-term success of your business depends on positive cash flow. Make the most of it by learning to properly manage your small business cash flow- the above strategies can help.

If you’re located in or near Cincinnati and need help with your business finances, contact Orcutt & Co. They can help you with your day-to-day accounting and bookkeeping, as well as payroll and tax prep.