A Business’s Guide To Managing Healthy Cash Flow

Financial resources are essential when running a business. These resources are limited. Therefore, cash flow management has been critical to a successful and growing business.

For entrepreneurs, learning how to manage business finances properly is crucial. One must understand the different financial statements, including cash flow statements, in managing money. But what is cash flow statement? For starters, a cash flow statement is a tool used by businesses. It determines its financial position by tracking its cash inflow and outflow.

Aside from knowing these fundamentals, here are some other ways how you can manage a healthy cash flow:

  • Create Separate Business Financial Accounts To Personal Accounts 

A separate business account will make managing your cash flow and forecasting much more effortless. Therefore, prioritize opening a business financial account. Additionally, apply for a business credit card. With this, you can use the card when making business-related purchases. Most credit cards have management reports that can provide complete details of purchases made for the whole month or a year’s budget.  

Aside from this, you can use business cards that can help you track your expenses and use this in your next year’s cash flow budget. It can increase your cash flow flexibility and monitor and limit your spending. 

Remember that when it comes to your business bank accounts, you must keep the number of people with access. Additionally, it would be best if you only used a dedicated computer for banking.  

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  • Keep Your Record Accurate And Updated 

To monitor your cash flow, you must ensure your records are accurate and should be updated regularly. Doing this lets you quickly identify the amount of money coming in and out. You can hire a professional accountant if necessary. 

It will also help if you consider using accounting or expense management software. These available technologies give you real-time cash flow information and can guide you in making better and more informed financial decisions.

Furthermore, when using these, you can predict recurrent expenses. They can also support your invoices, budget, and audits. You must understand the importance of different business financial tools to gain clear visibility of your business’s cash flow.

  • Do Cash Flow Forecasting And Projection 

Using your accurate and relevant records, review your cash flow monthly. Then, make a list of assumptions, such as predicting price increases for your raw materials and identifying how much you will charge your customers. You can choose from the three areas of pricing, including cost-based pricing, competitor pricing, and pricing in your target market. Then, determine how much revenue it will generate.

It would be best to project the growth reduction of sales due to some issues like the seasons and the current trading environment. You must also factor in all outgoing money in salaries and other costs. You can use a spreadsheet to add or delete some inflows when entering cash inflow. By doing this, you can have an idea about potential problems that may arise. Take your time and think about how to manage them when they happen.

  • Speed Up Your Invoicing And Payment Processes

You are likely to need money to maintain the operation of your business. Therefore, it’s vital to speed up your invoicing and payment process to keep money coming in. To do this, you must send out invoices to your customers immediately. Make sure that these invoices are easy to read and understand. You must include important details such as due dates and terms. 

Consider automating payment processes and accepting online payments and other electronic payments. Ask your clients to make upfront payments using credit or debit cards. Additionally, you can offer them incentives such as discounts if they can make early payments and charge them some interest if they tend to be slow payers.

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  • Manage Your Payables  

To correctly manage your cash outflow, you must analyze your expenses. Determine all the spending you can eliminate. You can review your rent or mortgage and plan on renegotiation. Also, check your travel and entertainment expenses. Outsource business functions to reduce the number of overhead costs. 

It’s also essential to avoid making large purchases and consider leasing or renting equipment. However, if you need to purchase an asset, explore cheap and free financing options. You can consider bank loans, non-banks, invoice finance, asset-based lending, and invoice factoring. 

Managing your business relationship is as crucial as managing payables. Create a meaningful relationship with your vendors to renegotiate and request extended payment terms. Try to use a payment agreement template when creating new financial contracts. In addition, try to avoid massive cash outflow due to paying everyone monthly. It’s vital to communicate with your economic team and prioritize paying the most important invoices.


Managing your cash flow can impact your business’s success. You should understand and study cash flow management to achieve maximum return on investment. Lastly, consider following this guide to make your business more successful and grow consistently amidst the changing business climates.