How to ensure consistent cash flow for your small business

by Amy Collett

As a small business owner, money management is a critical part of your operational success. According to Patriot Software, cash flow issues are one of the most common reasons small businesses file for bankruptcy. Luckily, there are actionable steps you can take to avoid this outcome. Optix Consulting offers services designed to support small business success, from strategic communication planning to professional development. The below guide offers tips for tracking, maintaining, and increasing your cash flow.

Organize a Tracking System for Your Expenses and Income

Keeping track of your incoming payments will allow you to monitor cash flow. Bench offers a list of the top expense trackers for small businesses and solopreneurs, including FreshBooks, Mint, QuickBooks, and more. These tools make it faster and easier to monitor your money. Having this information readily available will also simplify your general business bookkeeping and annual tax filing.

Monitor Your Accounts Receivable and Chase Outstanding Accounts as Needed

Once you start tracking your income and expenses, it will also be easier to pinpoint delayed payments. As a small business owner, you may have to chase clients to pay their invoices occasionally. While this can be uncomfortable, it's often necessary to maintain consistent cash flow. If you've never written an overdue payment letter before, check out these free templates from Fundera. You can adapt the templates as needed.

Find Ways to Cut Overhead Costs and Save Cash

An income and expense tracking system further makes it easier to find ways to cut overhead expenses, which can help you save money and keep more cash in your business. Freshbooks offers a small business owner's guide to reducing overhead. You might save on commercial rent by moving to a smaller office space or working from home, for example. When it comes to business equipment, you can save by renting instead of buying.

Build Up a Financial Buffer for Emergencies

By cutting overhead costs, you will be able to set aside more money for savings. Business savings can serve as a valuable emergency fund at times when your cash flow is low or inconsistent. SMB CEO offers tips for growing this financial buffer. For example, improving inventory management can help you avoid wasted money on overstocking. Further, you should have plans in place to scale up or down quickly depending on demand.

Finder also recommends automating savings to help build an emergency pot of cash. With an automated savings account, a predefined amount of money is moved directly into savings every month. You can decide in advance how much you want to set aside. This way, your savings grow and you don't even have to think about the process.

Don't Be Shy About Asking for Help When Needed

If you're still struggling with cash flow management, look for external help. You can find financial consultants via work-for-hire platforms like Upwork, for instance. You can scout out professional profiles based on traits like testimonials from former clients and cost. A freelance expert can provide personalized care, giving you one-on-one attention and developing a financial plan tailored to your precise needs.

Set Up a Passive Form of Income to Help Maintain a Regular Cash Flow

Finally, consider setting up a passive income stream. This will ensure you always have some source of income, even if cash flow to your primary business is slow. Bankrate offers a list of passive income ideas to inspire you. Options include selling information products, creating an app, peer-to-peer lending, affiliate marketing, and more. When selecting a passive income stream, choose something that aligns with your resources, interests, and skills.

The above tips can help you maintain a healthy cash flow for your small business. This will ensure you always have the money you need to pay bills and other expenses, promoting long-term success.

For more advice on entrepreneurship, trust Optix Communications. We provide a variety of resources to support startups, covering everything from internal employee communications to event planning. Find out how we can help you thrive.