Managing Business Cash Flow

Your cash is the lifeblood of your business. In its most basic terms, cash flow management is the art of delaying your outgoing payments as long as you possibly can, while encouraging anyone who owes you money to settle up as quickly as possible.

A good cash flow strategy can be broken down in two basic parts:

Part 1: Extending Payables

1. Choose suppliers with the most flexible payment terms. This may mean that you don’t always go with the lowest price. In many cases, flexible payment terms will end up improving your cash situation more than going with a bargain price.
2. Use online banking to your advantage. Schedule payments to go out on the last day that they are due. This stretches your cash as far as possible.
3. Talk to your suppliers. If you explain your cash flow situation, chances are that your suppliers and business partners will be more understanding if you need additional time to make a payment. Extend payments to a net-60 or net-90 if you can.
4. Take advantage of creditor terms. If a bill isn’t due for 30 days, don’t pay early.
5. Stretch your cash dollars as far as you can.
6. Check out the terms for early payment discounts. Some vendors will offer these, but check the fine print to see if these will actually improve or harm your cash flow management.

Part 2: Improving Receivables

1. Offer early-payment discounts and keep credit requirements strict.
2. Collect deposits when orders are taken and agree on clear payment terms.
3. Limit net-30 and net-60 contract terms.
4. Send invoices promptly and follow up on slow payments as quickly as possible.
5. Accept online payments to make it easier for your customers to pay quickly.
6. Take advantage of technology, using online tools so that you can access files anywhere and monitor your accounts on your laptop, tablet or mobile device.

If you are concerned about cash flow, ask yourself two questions:

1. What is my cash balance right now?
2. What do I expect my cash balance to be six months from now?

Sometimes, it’s necessary to take out a loan to properly manage your cash flow and set yourself up for long-term success. You could consider a revolving credit loan or an equity loan. Talk to a Uwharrie banker about your business cash flow needs and see how we can help.