Top 5 Ways to Protect Business Cash Flow

woman looking at computer screen
August 4, 2022

If you own a business and profits are growing, you’re headed in the right direction. As you know, profit is only part of the equation — you also need cash flow. Cash flow management is one of the most important aspects of running a business. According to a QuickBooks State of Small Business Cash Flow survey, more than half of small business owners report experiencing problems with cash flow.

Knowing how to improve cash flow is crucial. Here are the top five strategies for founders to protect business cash flow.

1. Create a business budget 

Business owners can create a budget with carefully estimated inflows and outflows to project cash flow cycles. You’ll want to consider the sales cycle, customer terms and discounts, delinquency rates, purchase and sale of inventory and equipment, payroll schedules, taxes and other day-to-day expenses.

A budget to help with cash flow doesn't have to be overly complex. To get started, use the free budget template for business owners from SCORE, a national nonprofit group offering resources for SMBs.

2. Collect receivables quickly

One of the most effective ways to avoid cash flow problems is to encourage faster payment of receivables. Your processes may benefit from:

  • Asking for a deposit when your customer places an order.
  • Sending invoices immediately.
  • Offering discount prices to customers who pay quickly.
  • Using technology to accept payments for faster processing.

Most companies collect accounts receivables within 30 days. Invoicing immediately and having processes to collect receivables quickly can help maintain a company's liquidity.

3. Use a Treasure account

When considering how to improve cash flow, most founders and CEOs consider how to best manage idle cash without losing access to funds. Generally, you lose liquidity when positioning your idle cash to earn revenue. But that isn’t always the case.

A treasury account, for example, can give you the best of both worlds. Compared to a typical business bank account, treasury accounts can give you higher yields:

  • Up to 15x higher with a Treasure Cash account
  • Up to 100x higher with a Treasure High Yield account

Whichever option you choose, you won't sacrifice liquidity. Depending on the account, you can access your cash within one to two business days. Learn more about how a Treasure account can improve your cash flow.

4. Negotiate payments and purchases

Lower prices might seem like the gateway to improving cash flow, but flexible payment options can also benefit the company’s bottom line. Ask suppliers about payment terms to see if you can better time them with cash inflows.

Another option to protect business cash is to skip costly purchases and lease instead. It might seem counterintuitive — leasing is usually the more expensive option. However, a lease can offer an approach to maintaining a healthy cash flow.

5. Assess pricing and inventory

Many business owners shy away from experimenting with pricing strategies. They often worry that higher prices will cause them to lose customers and sales. But this is not always true.

Increased pricing can have many benefits. Besides helping to maximize profits for small businesses, raising rates can help you improve your products and services, attracting happier customers willing to pay more for better quality.

Assessing pricing is also an excellent time to take an inventory check. Identify any items that aren't moving as fast as your other products. Stagnant inventory can tie up cash and negatively affect cash flow. Even if it means selling it at a discount, it's often better to get rid of what doesn't sell.

SMBs depend on their cash flow to survive. Discover how a Treasure account can be crucial in helping you manage your company's cash flow.

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