5 Cash Flow Management Tips for Business Owners

Getting a handle on your cash flow can be tough for small business owners, but it’s a must for keeping your company humming along (and for ensuring that you can sleep at night). A recent article cited that 29% of startups failed because of poor cash flow management. With almost a third of startups citing this as one of the main reasons they failed, it’s easy to see why cash flow management is important. So whether you’re just getting started or are looking for ways to run your business more efficiently, here are some ideas to improve cash flow management for your small business.

What is cash flow management?

The definition of cash flow management is the process of supervising, analysing, and adjusting your net amount of cash receipts, less your cash expenses. In short, it’s tracking how much money is coming in and out of your business.

1. Keep track of your cash flow.

First of all, do you have a firm grasp on how much money is coming in and going out each month? If you don’t, the first step is figuring that out, because that’s your starting point to determine where you are and what you need to change or improve. Also, if your business is not yet profitable, determine when you will break even and use that number for future cash flow projections.

Another troubling thing about cash flow management is the cumbersome process of separating business and personal expenses. Square now offers a business dashboard within its Point of Sale technology so business owners can have real-time access to their funds as soon as they make a sale. Business and personal transaction labels in your Square app make it easy to keep your business expenses separate from personal expenses.

2. Use online invoicing.

If you haven’t already implemented online invoicing, you’re missing out on an opportunity to easily streamline and figure out how to keep track of your cash flow. Paper invoices are hard to keep track of on both ends, and it’s too easy for them to get, ahem, “lost in the mail.”

Square Invoices allows you to send invoices and see who has (and hasn’t) paid, so you know who to follow up with. Invoices paid online are transferred directly into your bank account in one to two business days. You can also record invoices that are paid with cash. This cash flow management system will help you keep track of money coming in, and more importantly, money going out.

3. Set up online payments.

Another cash flow tip for a quick and easy way to deposit and access funds is with Square virtual terminal. As the name implies, you and your team can take card-not-present transactions and over-the-phone payments, even late at night or on the weekend. Just Log in to your Square account and go to Virtual Terminal, and within minutes you can start accepting online payments and see the deposits as soon as the next working day. Each per typed-in transaction costs 2.2% of the total charged amount, and there are no monthly fees. Plus, you’ll have access to cash flow management tools and on-demand analytics.

4. Incentivise early payment.

Cash flow management for small businesses is something that you need to control because of most startups’ razor-thin margins. The faster you can collect payments, the better your forecasting will be. You should set clear terms, which could mean anything from setting a due date two weeks from the invoice date or, for ongoing services, requiring payment by the 15th of every month. Then, if payment is due in two weeks and a client pays you in five days, try offering a slight discount, like 2% off. Or you can reward early payment with a discount on future products or services. By the same token, you should penalise delinquent payments with either a one-time late fee or another percentage-based pricing structure.

5. Generate some new business.

One of the best ways to improve and manage cash flow is, of course, to make more sales. But new sales don’t always have to mean new customers. Servicing your regulars with fantastic service is the best way to retain existing customers to create word-of-mouth referrals. Square’s customer management tool allows you to quickly send a personal message to a customer right from their profile. You can also sort and search your customer base and spending behaviour, allowing you to give a more personalised shopping experience.

Let your customers know about sales or new merchandise, and depending on the group, you can also offer special discounts or gifts with purchase. No matter what you’re offering, customer management is a simple way to boost online business and get more people in your store.