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One of the most straight forward ways to manage financial statements is to use accounting software that can work seamlessly with a cash flow management tool. Together, these solutions can provide real-time visibility into all financial data and automatically generate accurate financial statements. For businesses that prefer to outsource their accounting services or rely on internal accounting professionals who manually manage finances, it’s critical that they provide regularly updated financial statements. Not only will technology save you time, but it will also save you money by providing you with the tools to better understand and manage cash flow. As a rule of thumb, small businesses should create cash flow projections on a monthly rolling basis, forecasting 12 months out. To improve cash flow forecasting accuracy, projections should be updated weekly with actual sources and uses of funds.

To be a small business entrepreneur means you have the drive, passion and a great idea to serve customers in new ways. However, it also means you need to stay organized and concentrate on the details of the business, including ways to manage cash flow. Consider flexible ways to finance long-term and capital-intensive assets such as equipment and facilities.

Here are 8 ways to manage cash flow

1. Shopify Balance is a free financial account that lets you manage your business’s money from Shopify admin.
2. I prefer leveraging data and relevant insights to optimize cash flow.
3. We believe everyone should be able to make financial decisions with confidence.
4. It helps identify any cash flow challenges and potential gaps between money coming in and money that needs to go out in the future.
5. Small business owners often don’t realize the resources available to them at their financial institutions.

Business owners often fall into the trap of believing that as long as they are showing a profit on their books, there will be enough cash to fund ongoing operations. Profit, like cash flow, is either negative (a net loss) or positive (a net profit), but that does not mean that cash flow and profit are the same. If a small business owner understands the relationship between cash and profit they can more easily make key decisions such as how to pursue new opportunities or how to adjust to changes in the market. Tesorio offers advanced tools for cash flow management, like unified bank account reports, cash forecasting, reporting, and analytics, and collaborative features. It’s like a rainy-day cash reserve you set aside to cover operating expenses or debt obligations, economic downturns, or emergencies. With cash flow management in mind, consider updating inventory to reflect current supply-and-demand levels in your business.

Cash flow glossary: Six terms you should know

Jirav is a comprehensive financial management platform with dedicated features to analyze and optimize cash flow. It specializes in integrating your cash flow analysis with the overall financial picture of your business. The cash flow spreadsheet is an outline of where your cash is going. It shows you when cash will be coming in and when it will be going out, and it’s a great way to visualize cash flow management and adjust your approach. During tight times, contact the suppliers you have a strong history with and request more favorable terms, so you can manage cash flow effectively. Getting good at cash flow management is one of the best things you can do for your business.

Get your free cash flow management template

Do a frequent ABC analysis of your products to determine what’s selling and what’s not. Then, you can keep more inventory on hand that’s likely to move fast and get rid of dead stock at a discount. Effective cash flow management in business starts with forecasting your cash inflows and outflows, timing, and projected cash balances. To calculate cash flow, a business notes how much cash is available at the beginning and end of a specific period, which may be a week or a month. The business will have a positive cash flow if there’s more in the account at the end of the period than when the period began; it will have a negative cash flow if there’s less cash at the end. I prefer leveraging data and relevant insights to optimize cash flow.

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Establishing a break-even point – the point at which total sales equal total expenses – gives a business a tangible goal to work toward and can create a context for managing cash flow. Understanding the break-even point can help managers figure out the critical level of business they should be targeting. This might inspire the need to create a more stringent budget to better costs and find ways to cut expenses or increase sales, for example. What about the cash you need to operate and grow your small business? Cash flow management involves tracking how much money is coming in and out of a business over time.

Being too aggressive about growth, such as investing in new resources too far ahead of the revenue they will generate, can hurt cash flow. For example, signing a new lease, hiring more staff, or purchasing new equipment might seem necessary for growth ¬– and they generally what is days sales outstanding dso are – but rapid growth can lead to cash flow troubles. Be sure your business has the sales and financial cushion to support new growth and expansion. Catch up on our insightful session, Practical Cash Flow Management Strategies, now available as a recorded webinar.