Bank on It: How to Manage Cash Flow


A business that does a good job managing cash flow will have funds necessary to operate a successful business and take advantage of opportunities that may arise.

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Edward Thomas Associates: Birds in dollars square to illustrate small business accounting cash flow

Any business owner has heard the sayings, “Money Talks” or “Cash is King.” When your company has cash on hand–or in the pipeline–it operates most efficiently. You are able to pay your employees, yourself, your taxes, your bills. You can invest in new equipment, spend on R&D, update your equipment, expand your facility or purchase new inventory.


With insufficient cash flow…well, the opposite is true. Your business suffers, you suffer. Maintaining adequate cash flow gives you freedom and peace of mind and the ability to keep employees and vendors satisfied and operate a successful operation.


Here are ways to increase and maintain cash flow:


  • Invoice immediately: as soon as a project is complete or the product delivered, bill it. Don’t wait to invoice every two weeks; such a delay can catch up with you.


  • Get deposits: if you’re going to be working on a large project or for an extended length of time on that project, advancing sizable costs or purchasing materials, you should ask for some money up-front.


  • In-progress invoicing: on a longer-term project, you may want to have the contract include an agreement to payment for in-progress work.


  • Payment terms: specify in your contract, and on your invoice, your terms of payment. Having these terms set in advance will encourage timely payment and provide support if you need to pursue legal action. You may also want to offer a discount, like 2% on the invoice, if customers pay within 10 days. Be forewarned that some customers may take advantage of the discount even if they take longer to pay.


Edward Thomas Associates is now a Certified Xero Advisor — contact them to put Xero to work in your business.



  • Collections: contact customers immediately if an invoice is past due. If there is a delay, nicely ask when you can expect payment. Remind your customer about the terms they agreed to. Be persistent yet polite in your pursuit. Be sure to follow-up with statements including applicable finance charges.


  • Keep your accounting up-to-date: this includes your bank balance (don’t forget payments that have not yet cleared), accounts receivables and payables so that you are well aware of what’s on hand as well as what’s coming in. Only this way can you budget for larger expenditures or plan on new purchases, salaries, rent, overhead, etc. A cloud-based accounting software program like Xero gives you up-to-the-minute information about your financial situation.


  • Build a cash reserve: you’ll have money available to take advantage of opportunities (new equipment, discounted inventory or upfront expenses for a large, new project). A rainy-day fund may come in handy for unplanned repairs or emergencies.


  • Keep personal and business income and expenses separate: pay yourself a salary, not a here-and-there bonus. Work from home? Create separate accounts for business expenses and personal expenses.


  • Set a budget: having guidelines in place and tracking your budget with actual expenditures and income can let you know if you need to increase sales or look for ways to decrease expenses.


  • Line of credit: having a line of credit available to your business may be advantageous in the event you don’t get paid on time or need more cash than you have on hand to take advantage of an opportunity or for the advance purchase of production materials.


  • Money out: cash flow also means outgoing cash. Paying bills in a timely manner will help insure that you will be extended credit the next time and that you aren’t incurring exorbitant finance charges. Keeping vendors happy with on-time payments may mean they’ll go the extra mile for you if a rush project shows up. For the most part, don’t pay bills early (just to get them off your desk). That may leave your wallet empty when other expenses arise.



Hiring an accountant to set up your accounting system, help you create a budget and oversee your monthly reporting can minimize cash flow shortfalls and maximize incoming cash. Edward Thomas Associates is a financial and accounting advisory firm. They are certified Xero and BlackLine cloud-based accounting software partners. If you’d like more information about how they might help your business, contact Edward Thomas Associates.