New and Classic Ways to Manage Your Cash Flow

by Sean Ross

2 min read

For small businesses, cash is king. Very few companies can operate without access to liquid cash for even brief periods. Unfortunately, maintaining a stable pool of funds isn’t always easy; more than half of Canadian small business owners identified “managing cash flow” as one of their major challenges, according to October 2016 research from Equifax Canada. If you’re a small business owner or executive, it pays to train yourself on the basics of cash flow targeting, design, and how to react whenever your available funds dry up.

How to Improve Cash Flow

Nearly all businesses are best off by targeting clear cash flow milestones. If you haven’t done so, make sure you calculate how much cash you need to access during a given week, month, or quarter. Find out what it takes to maintain a positive cash flow, which means your business collects cash faster than it pays cash out. Once you know where your baseline is, take stock of your major variables. Identify the following groups, and write out their impact on your cash flow targets:

  • Largest customers/clients
  • Suppliers and contractors
  • Average receivables and payables
  • Seasonal sales patterns, if any
  • Critical salespeople and other important employees
  • Your salary

Create a Contingency Plan and Tracking System

You should create contingency plans in case one of your major variables changes over time. Next, implement and use an efficient tracking system. One thing to consider is a secure computer program or app to help monitor your fund flow. Modern systems are often very effective at warning you before real cash flow problems appear.

Establish Clear Payment Terms

This step is particularly important for businesses with customers who rely on credit financing or extended payment plans. Your accounts receivable management process needs to be solid, or your company could find itself with a bunch of IOUs and current bills to pay. Some tips for improving payment flow:

  • Time your expense payments with your flow of receivables.
  • Offer multiple ways for customers to pay.
  • Invoice quickly.
  • Offer discounts or bonuses for early payment.

Many businesses rely on business lines of credit, company credit cards, or business loans to address cash flow problems. Debt financing can be risky, but it’s a good idea to have established relationships with banks, just in case.

Dream Payments-QuickBooks Online Partnership

Intuit QuickBooks Online, the leading cloud-based financial management software for Canadian small businesses, now partners with the Dream Payments app to help small businesses improve their payment systems and cash flow management. Jeff Cates, President of Intuit Canada, expressed excitement about the partnership. “The new Dream Payments-QuickBooks Online partnership is designed to meet two critical customer needs,” he said, citing point-of-sale functionality and seamless syncing with the other QuickBooks solutions. Users can instantly reconcile all sales transactions, manage taxes, keep an eye on inventory, and accept online payment from customers, all from the same place. The software is mobile accessible and easy to learn, so you can spend more time growing your business and less time stressing over available funds.

References & Resources

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