How to manage your small business cash flow

Managing small business cash flow and finances can be one of the trickiest tasks for entrepreneurs. You have to constantly keep on top of payroll and keep suppliers happy, while also ensuring that your invoices are paid on time.

ACU’s Community Financial Centre Director, Nigel Mohammed, helps entrepreneurs to navigate the choppy waters of business finances. By following Nigel’s tips, you can take control of your company’s cash flow and accounts.

Make it easier to collect money from your customers

One way to improve cash flow is to speed up payments. “You want money to be coming into your account faster than it leaves it,” Nigel explains. “If you’re giving your customers 30 to 60 days to pay, you need to negotiate with suppliers to match or better that.”

Make it easy for customers to pay your invoices. “Merchant services that allow you to accept credit and debit cards can speed up payments,” says Nigel. Invoicing software can also help by automatically sending customers payment reminders and providing one-click payment options.

Related: What small business should expect from their financial institution

Automate supplier payments and payroll

“You can set up automatic transfers to suppliers or payroll,” Nigel advises. “You can even schedule several payments to a supplier — for example, with automatic funds transfers — so that they are all made at the same time, which saves on transaction fees.”

In addition, you can set up automatic payments to pay all invoices on their due date. This keeps money in your business account for longer, without incurring late payment fees.

Having access to a business line of credit or company credit card can offer alternative ways of paying for daily expenses while keeping cash accounts maximized so they can cover larger expenses, such as payroll. Outsourcing payroll to a third party can also help with dealing with deductions like EI and CPP, as well as freeing up a lot of your time.

Look into your small business cash flow crystal ball

“Having a good understanding of your company’s cash flow is essential for a healthy business,” says Nigel, adding that by maintaining cash flow projections, you’ll have a good idea how much capital you’ll have available at any given time.

Depending on your business, you may need to monitor cash flow once a week or even daily. In some industries, such as retail and manufacturing, these regular cash flow projections are essential. Fortunately, financial software can provide you with an overall cash flow picture at any time.

Having a cash flow business plan will also help you to deal with any shortfalls. Ensuring that you have reserves of at least three months of working capital will enable your cash flow to survive late-paying customers or unexpected expenses.

Plan for seasonal income changes

“If your business is seasonal in any way, you have to take this into account in your cash flow planning,” says Nigel. “Try negotiating seasonal payments with your suppliers, to keep your cash flow healthy when income is lower.”

You could also arrange a line of credit to ensure suppliers are paid, even during low-income months.

Did you know ACU offers business credit cards? Check out the details and special offers here!

Keep separate business accounts

“Having a separate business account is essential,” Nigel explains further. Many small businesses may not have separate accounts for their personal and business banking, but this could cost you time, administrative work and a lot of frustration in the long run.

“It may be cheaper to run everything through a personal account, but the way your business income is taxed is very different from personal income,” he notes. A dedicated business account makes for much simpler accounting.

It’s also advisable to have a separate account for GST/HST. Keeping this separate means there is less chance you’ll spend it, and therefore, you will have all of the necessary money available when it’s time to pay your GST/HST bill.

Get dedicated business cash management advice

“Your financial institution should be able to give you guidance for all of your financial management needs, including cash flow,” says Nigel, who works with many small and medium-sized businesses across a wide variety of industries.

“ACU’s Community Financial Centre has a dedicated Cash Management Specialist as part of its team,” he continues. “They’re constantly giving our customers priceless strategies for improving their cash flow in both the short and long term.”

Call or email to set up an appointment to speak with an ACU Community Account Manager who can discuss your business financial health — and start getting more from your business banking.

Phone Direct: 204-958-8588
Toll-Free: 1-877-958-8588

About James Burns

James Burns is a freelance writer and copywriter. With a background in journalism, financial services and marketing, he writes for a wide range of companies across the financial services spectrum. His articles and blogs provide financial advice and insights to both consumers and businesses.

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