Small Business Cash Flow Strategies to Gain the Competitive Edge

Cash flow is the lifeblood of a small business, and the efficient management of cash receipts, payables, payroll, and other transactions is a strategic priority for the growth-oriented small business owner. Here are some of the cash-flow strategies that financially savvy small business owners are using today to get that competitive edge:

  • Understand your operating cycle: Regardless of size, every small business must deposit, monitor, and manage cash receipts; make payments; fund purchases; and invest in the company. Reviewing and understanding each step in this cash-flow cycle can help a company work more efficiently. 

  • Review your payroll process: If you pay your employees twice a month instead of every other week, you will be managing 24 payroll periods instead of 26 during the course of a year, making your company more efficient. 

  • Capital is so important to growing a business. If you don’t have what you need for your business’s development, all you’re doing is paying your bills and just getting by. Having enough working capital to pay those bills on time every month is important, but to take your business further, it’s growth capital you should be paying close attention to. To do that, you have to understand how growth capital works, what it does, and how it helps your company develop from a small business to something much larger and stronger.

Even if your small business is growing, you may find yourself needing extra cash to cover day-to-day expenses such as payroll, rent and inventory, or to pay for short-term projects that could grow your revenue in the long run. Uneven cash flow is one of the biggest challenges of small businesses throughout all industries. In a perfect world, you’d walk into your local bank and walk out with a business loan long before you wound up in a cash crunch. Well, those days are long gone! If you haven’t been in business at least two years, or lack good credit and collateral, chances are a traditional bank loan is never going to happen.

A cash flow loan may be used for any business expense, but some common uses are: 

  • Working capital
  • High ROI short-term opportunities
  • Purchasing highly-discounted inventory
  • Payroll
  • Marketing 
  • Business expansion

Short-term cash flow loans are best used for short-term projects that would divert money from day-to-day expenses but ultimately grow your business, like taking on a big contract with a major company or adding extra seating in your restaurant. If you need cash fast, a cash flow loan may be your lifeline.

Cash flow can make or break a small business's health. More often than not, maintaining it is a balancing act between credit and cash on hand, and it's a tricky tightrope to walk. As your business begins to grow, this intricate balance has the potential to become even more complicated. Especially if you're relying on big clients or irregular payment cycles, your cash flow can become unpredictable. As the numbers grow, so do the stakes and the best possible asset you can have is a plan. Have small business cash flow questions? We've got answers!