Tips for managing your cash flow

By Tamryn Dicks

Managing your cash flow
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Managing your cash flow and forecasting not only helps you stay on top of things and stay in business, but it is also a vital part of business strategy. It should be your number one priority as a business owner.

For the small business, cash is KING. Running out of cash is the number one reason businesses (of any size) fail. You could be making lots of sales, but if there is no money in your bank account then you can’t pay bills and salaries, and your doors will not stay open. You need to know when cash will be high and when it will be low in order to know when to spend and when to save.

Here are twelve tips for managing your business cash flow:

1. Monitor your cash

Up-to-date and accurate accounting records are not a “nice to have”, they are essential to the health of your business. In addition to having accounting records, you need to regularly use them to create and maintain cash flow forecasts, budgets and strategies. You should be checking your actual cash flows in and out of your business against your predictions in your forecasts and budgets on a regular basis – weekly if you can but at the very least monthly.

2. Create a budget

When it comes to spending your company’s money, the strategy of “winging it” is not recommended. Spend the time on working out where your money needs to go, why it has to go there and where you would like the excess to go, and then put together a monthly budget that helps you make it all happen.

3. Stick to your budget

Creating a budget is a fairly useless exercise if you don’t stick to it. Do not be tempted to spend money where it doesn’t need to be spent. Remember to keep the bigger picture in mind, if you know the end goal that you are aiming for, it makes it so much easier to be disciplined along the way. Spending money on assets for “growth” will be money wasted if you have to shut the business down in two months’ time because you didn’t pay salaries. Know when to spend and when to stop.

4. Improve your billing process

I highly recommend investing in a cloud accounting solution that allows you to generate quotes and invoices on the go. The sooner an invoice reaches a customer the sooner the payment will reach you. In addition to the instant access, most cloud solutions allow you to set up invoice templates or repeat billing – so they will invoice monthly customers for you without you having to do a thing.

5. Improve your collections

Shorten your payment terms, if you can do so without offending people, don’t have any terms at all and ask for immediate payment. If possible, request 50% deposits up front. If you do have customers on terms, be strict about charging interest on late payments and consider offering small discounts to customers to incentivise early payment. It is better to get 5% less but to have the cash in the bank now, rather than receiving the full 100% ten days late. Most cloud accounting solutions also have wonderful Reminder tools so that you can send statements and reminders to clients when their bills are due.

6. If possible, set up a debit order or credit card system for payments.

If you sell products then immediate payment by credit card is a cash flow no-brainer. The merchant will charge you a fee, but like an early-payment discount it is a small price to pay in order to receive immediate cash. If you are a service provider and you have clients on monthly retainers, then a debit order system ensures monthly payments on specific dates.

7. Bill your worth

Many small business owners are too scared to charge what they are worth. Make sure you are not underselling yourself, your time is money – if your service or your product meets a need then it is worth the price. Make sure you are charging the maximum amount you can while providing full value to your customer.

8. Review your suppliers

While you should never pick your suppliers on price alone, you should always be sure that you are getting the best price for the best level of service. Do a regular check on your repeat costs to be sure that there isn’t a new supplier who can’t offer the same or better service for a lower price. Or negotiate with your current suppliers to see if they won’t give you better rates for loyalty or bigger orders. Don’t feel bad shopping around for better prices – make it a habit!

9. Review your expenses

Sometimes we get so involved in running our businesses that we forget to take time to analyse them. Make it a monthly habit to review your expenses so that you are 100% certain that you aren’t spending money unnecessarily. Check that you aren’t paying for a service that you no longer use. Track consumables carefully and make sure you don’t have unnecessary waste. Business needs change over time, make sure your spending lines up with what your business actually needs.

10. Outsource before you hire

Having a solid and reliable team is wonderful, but there is always a time period during growth where you have more work than you and your current team can handle, but not enough revenue to cover the cost of another staff member. Outsource the function until your revenue grows. In some instances, permanent outsourcing can solve a problem at a much lower cost than hiring.

11. Travel less, Skype more

The world has changed and face-to-face meetings aren’t the necessity they once were. As technology improves, more and more people are quite happy to virtually meet with you and Skype is not the only option available to you. There are now many free and cheap meeting solutions that remove the need for you to get into your car. Not only do you save on fuel, but the time you don’t spend on travelling can be spent creating more income.

12. Go completely virtual

If it is not essential to the running of your business, lose the brick and mortar office. There are many virtual office solutions available now, from a simple phone answering service to hotdesking or office-share options, you will be able to find a virtual office solution that suits your business model and meets your needs while drastically reducing your monthly expenses.

Bonus tip: Reduce your debt

While business loans and credit can provide much-needed cash injections for your business, they should be used sparingly and wisely. If you consistently need to borrow money to keep the business running, then it is not successful in its own right and you should rather re-evaluate your business model than get yourself into more debt.

Constant monitoring and managing your cash flow is a business necessity. Positive cash flow helps you to pay your bills, invest in new opportunities and stomach the unpredictable. Besides, life is far less stressful for a business owner when there is money in the bank!

Tamryn Dicks
Tamryn Dicks

Tamryn Dicks is a SAIBA Business Accountant and a SAIT Tax Practitioner. Her company, Pharsyde Accounting, offers payroll, bookkeeping, accounting and tax services to small business owners in South Africa. Send her questions: or visit:


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