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Tips for Handling Your Business Cash Flow

Owning a business isn’t as fancy as it looks from the outside! It comes with countless responsibilities sprawling each and every edge of your business. Be it your office with your loaded task force, paying supplies and salaries, arranging for raw material supply, or even you keeping a close watch on online web pages and targeted clients. With so many errands in progress, the ultimate goal of a business is to convert cash inflow to profit.

Something that we often as business owners fail to notice is that profit dwells where there is an organized check on cash flow. Needless to say, profit is attainable only via effective handling of the working capital entering the business.

Why is Monitoring Cash Flow Important?

Cash flow can be divided into 2 types: Positive cash flow and Negative cash flow.

1. Positive Cash Flow

Positive cash flow, as the name suggests is a favorable cash flow index where the incoming cash is greater than the amount of cash exiting in the business. Incoming cash flow is from sales completed, accounts, loans, and invoice financing. This allows for profit to rise up in the business.

2. Negative Cash Flow

This is a heads up for a potential loss that you will have to incur overtime. Cash leaving the organization is in this case greater than incoming capital and can cause great risks to your marketing front. It is crucial that we mitigate this by cutting down business expenses and streamline cash flow with a proper strategy. You need to incorporate a break-even analysis to ensure this.

Break-even analysis is an estimate of the time scale at which your company will be profitable based on various factors. It can be calculated by dividing the fixed cost by the revenue per unit. Further, you need to deduct the variable cost per unit from this. This is also critical in analyzing how you need to implement an emergency Plan-B in case of an unprecedented financial threat.  Always keep close contact with your accountant to root out such incidents and plan ahead.

Incoming Cash Flow Outgoing Cash Flow
Sales Equipment purchase
Loans Employee salary
Bills-Rent, phone bills, Travel, WIFI, electricity bills.
Repaying loans

Indicators to Estimate Cash Flow

Key Performance Indicators (KPI) are prime factors that weigh the state of your business and cash flow.

1. Customer Acquisition Cost

The primary factor for strong management of your cash flow index is the cost of customer acquisition. The finance you keep aside to pull in your targeted customers could cause your outgoing cash to soar if not supervised properly. Many companies have lost most of their incoming cash by spending hefty amounts of money on advertising and marketing tactics. This could drain your capital over time without your notice.

2. Turnover

Most businesses track their cash flow on a weekly, monthly, or quarterly basis. Maintaining a database to keep finances under check will enable you to reflect on past profits and risks encountered, so that avoids mishaps in the future.

3. Expenses

Sometimes the trivial frequent bills you pay can soak up your profits without a trace. You can only trace such loopholes if you enter them into your inventory. Bills like daily coffee or snack bills for employees, recreational bills like office meetings, parties, and trip bills you incur frequently, and even the phone/wifi bills will drip from your profit slowly but drastically. You can’t manage what you can’t measure.

4. Valued Customers

Maintaining a good rapport with regular customers can help you earn lot more new customers over time. When you convince them, they convince others. You can collect testimonials from satisfied customers and feedbacks so that you can improve products or services that don’t sell well in your business.

Finding a Solution to Cash Flow Problems

There are numerous ways to mitigate cash flow issues with the help of banks and proper cash flow strategies. Anything as small as an excel sheet that is systematically maintained comes a long way in analyzing possible risks and evaluating the pace of your business.

1. Business Loans

Business loans offer plenty of schemes for small and big business firms. You can try short-term loans like a credit line from the account linked to your business in case of a quick financial dip.

If you want a long-term loan, you can apply for it with minimal interest. There are various online portals that offer business loans that offer quick processing of loans with no need for collateral, flexible repayments, and extended loan tenure.

You have an array of other loan options too which include equity funding, equipment finances, invoice financing, and supplier credit.

2. Separate Business Account for the Company

Keeping a dedicated account for your business helps you keep track of all the cash inflow and outflow. It is recommended that you purchase a credit card for that account so you can make business-related payments through that account. Segregating this from your personal account will act as an automatic reminder in case you are on the edge of exhausting your business funds and also preventing you from filling in the gaps with money from your personal account.

3. Sell off Obsolete Equipment

Make sure that you don’t keep the equipment you no longer need in your office. They just take up most of the space and have no use at all. Sell them off so you can use the money to run other errands in your office.  It is an easy way to make quick cash too in case of a small financial crunch. Also, reconsider when you purchase new inventory in the future and analyze whether you need it or want it. If it is a necessity, go ahead.

4. Money Reserve

To save your company from a huge financial crunch in unprecedented cases, it is advised that you save up money worth at least 3-6 months worth your expenses to cover up the break-even point.  If you do not come with strategies to handle this cash flow mechanism, it can jeopardize your company.

Remember, the profit is not the ultimatum. It is the resiliency you obtain by managing your cash flow and consequent progress you make, that helps you stand the test of time!

5. Choosing the Right Payment Processor

Choosing the right payment processor will also help in managing the cash, going out of the company. Being as a business, you have to accept the payment in different forms and credit cards are one of them. But you also have to pay a good amount of money for every payment you receive.

So, choosing the right payment processing companies is a crucial step. Analyze the various payment processing companies and choose the one that offers lower fees and cashback offers as well.

Ajeet Sharma, the founder of Financegab and a well-known name in the field of financial blogging. Blogging since 2017, he has the expertise and excellent knowledge about personal finance. Financegab is all about personal finance which aims to create awareness among people about personal finance and help them to make smart, well-informed financial decisions.


  1. Handling of business cash flow is not easy for anyone, here is the best tips for cash flow handling.

  2. Hello FinanceGAB
    Can you suggest me how to handle daily budget and cash flow which was collecting from my business.

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