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TruMark Financial Blog
December 19, 2022

How small business owners can improve cash flow

Running a small business is no easy feat. Aside from the day-to-day activities, most owners also manage the company’s finances, operations, and marketing. Keeping it all running smoothly comes down to one thing – cash flow.

Cash flow refers to the movement of money in and out of the business and is the lifeblood of every organization. If one part slows, it can bring a thriving company to a screeching halt. For example, if clients are slow to pay invoices, it can cause delays in paying your vendors or prevent you from buying more inventory.

While sales and profits are the goals, every business owner should work to make sure their cash flow process is running efficiently. If you’re facing cash flow challenges, consider the following tips.

Budget regularly
Mike Tyson famously said, “Everyone has a plan until they get punched in the mouth.” That rings true for the vast majority of small business owners. While you made a budget at the beginning of the year, the daily grind of running a business takes over. Surprise expenses pop up, markets fluctuate, and before you know it, your budget for the year took a drastic turn.

When creating a budget for your business, try to keep it agile and revisit it often. What works on paper might not always follow suit in real life. So, make updates as you go and always be on the lookout for ways to reduce expenses. It’s much easier to adjust expenses when cash flow issues arise if you have an active budget to base decisions upon.

Stay on top of the billing cycle
Every business owner loves to do billing, right? It’s easy to become distracted with running your business and put billing on the back burner. However, this is one of the most common causes of cash flow problems for small businesses.

Instead, create a billing schedule throughout the month and stick to it. Sending out invoices late is the same as customers paying late – it all leads to cash flow challenges when account receivables are delayed.

Add more payment options
If your business struggles to collect payments from customers, you might consider adding to the forms of payment you accept. Adding credit cards or options, such as Venmo or PayPal, can increase the frequency you are paid. While some of these options might charge you a fee, it could be well worth the money if you’re facing cash flow problems. You might want to survey your existing customers if you’re unsure what payment options they prefer.

 Provide invoice discounts

Many small businesses invoice their customers – then pay their suppliers once the payment is received. If customers are late in paying, it can cause the small business to delay payments to their suppliers. One way to speed up customer payments is through a common practice called invoice discounting.

For example, you could offer an invoice discount, such as 2/10 net 30. This means that clients can deduct 2% off the invoice amount if they pay their bill within ten days. Otherwise, the total amount is due in 30 days.

Invoice discounts are a great way to speed up the pace at which clients pay – especially those eager for savings.

Create an emergency fund
Every business should have an emergency fund – just as you should for your personal finances. This money is put aside to cover unexpected expenses or help with unforeseen cash flow issues.

An easy way to build your business’ emergency fund is to treat the monthly savings as a normal monthly bill. For example, when paying invoices for the month, “pay” your business $500 by transferring that amount into a special savings account.

 Consider a business line of credit
A business line of credit is an excellent tool in times of uncertainty or cash flow hiccups. Unlike a regular business loan, where you have set monthly payments, a business line of credit operates more like a credit card.

The money is available if needed, but you don’t owe anything until you use the funds. Once you borrow money, your payments will begin. Upon repaying the borrowed amount, the fund will become available again.

Many companies carry a business line of credit simply for peace of mind. If you never need to draw on the funds, that’s great. But the funds are there to use should unexpected expenses arise or you want to expand your business.

Renegotiate terms with vendors
The saying, “You never know until you ask,” rings true regarding vendor negotiations. If your supplier has shorter payment terms, inquire about extending them. For example, instead of a 15-day payment window, ask for 30 days. If you’ve worked with a vendor long enough, they are usually open to renegotiating payment terms – especially if you have a good payment history with them.

 We’re here to help!

Cash flow is king when it comes to managing your business. Always be on the lookout for steps you can take to receive customer payments quicker and pay your suppliers more efficiently. If you’re interested in opening a savings account for your emergency fund or want to learn more about business lines of credit, we’re here to help.

Please stop by any of our convenient branch locations, call 1-877-TRUMARK, or click here to schedule an appointment.




Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.