4 Cash Flow Strategies for Small Businesses

A small business owner can do everything right — expand products or offerings, cultivate loyal customers, meticulously manage inventory — and still experience cash flow ups and downs. It’s a common scenario for small business owners, and while it can be challenging, effectively managing cash flow is essential for long-term stability, no matter the size of the business.

What is cash flow management?

Cash flow management involves carefully monitoring and optimizing the movement of money in and out of a business and is crucial for maintaining financial stability and sustainability. One example of managing cash flow effectively is avoiding running out of available cash before the end of the month. Ideally, you shouldn’t spend more money than the income your business is earning in a month.

We’ve outlined four must-dos when it comes to managing cash flow for your business. These strategies, when implemented, can help business owners navigate financial challenges, seize opportunities, and pave a path to achieving business goals.

1. Create a forecast and a budget

Financial forecasting and budgeting are fundamental tools for managing cash flow. Forecasting is predicting future income and expenses. Budgeting is all about planning how to spend money. Both help businesses prepare for the future, ensuring they don't overspend and can handle unexpected changes.


A financial forecast can help you estimate expected revenues, expenses, and cash flow. It should be based on historical data such as sales figures, inventory information, expenses, market trends, and other relevant factors. Ideally, it’ll reflect what your business can realistically achieve and help you avoid making promises that you can’t keep.


You can use your financial forecast to build your business budget, which serves as a detailed projection of cash inflows and outflows for a specific period, such as a month or a quarter. Once you create a budget, you can monitor and compare actual performance against budgeted figures on a monthly basis. This allows you to identify any deviations, adjust business operations or strategies, and plan for contingencies such as unexpected expenses.

2. Tighten accounts receivable management

Efficient management of accounts receivable is vital to maintaining a healthy cash flow and helps ensure payments are made and received in a timely manner. You can prevent cash flow bottlenecks and improve financial stability by:

  • Drafting clear invoicing and payment policies. Ensure that all invoicing and payment policies have the necessary details, including payment terms, due date, accepted payment methods, and late payment penalties.
  • Reviewing and monitoring any outstanding payments monthly. Keep a running list of any outstanding or late payments so you can contact anyone who owes your small business money.
  • Establishing a collection policy. Always have a plan if customers fail to make payments within a specified time frame. In some cases, this may require working with a professional agency that can help collect overdue payments.
  • Making payments convenient for your customers. Learn about the ways your customers prefer to pay and implement solutions that work for them and are easy for you to manage.

3. Monitor financial activity regularly

Small business owners can understand their business’s cash flow better by forecasting, budgeting, and tightening accounts receivable. But remember: Consistency is key. You should monitor all financial activity, including cash inflows and outflows, on a regular basis, typically monthly.

4. Ask your business banker for help

Your business banker can make understanding and monitoring your business’s finances easier to navigate. Our bankers work directly with small business owners to establish realistic financial goals and budgets and discuss any business fluctuations or concerns.

If you have questions or are looking for financial guidance for your small business, we have business bankers ready to help. Learn more about partnering with us.




Business Banking

Recommended Articles