Keep the cash flowing

For small businesses, the saying “cash is king” holds true. Having enough cash on hand to make payroll, purchase supplies and cover other operating expenses every month is essential to the success of your business. This all starts with maintaining positive cash flow.

What is positive cash flow?

Essentially, positive cash flow means there is more money coming into the business each month than leaving it. Cash flow is often confused with a company’s profits, but they are actually quite different.

A profitable month in any business is good news, but, if invoice terms are net 30 days, the business can still be short on cash as it awaits payment. So it’s important for merchants to monitor both their cash flow statements as well as profit and loss statements to get a true picture of the health of the business.

How can small businesses avoid cash flow issues?

Cash flow can be an issue periodically for most merchants, but there are proven strategies to improve and prevent shortages. The following are best practices for cash flow management that many merchants use to solve their cash flow problems:

Understand where your cash flow stands. The more data you can gather in one place, the better insights you will have to help your decision-making. One of the easiest ways to harness all that data is by leveraging technology. Some solutions track a merchant’s latest financial data, create cash flow statements and include predictive analytics that create cash flow forecasts.

Worldpay 360, for example, is an all-in-one business management and payments solution for businesses designed to unlock opportunities, elevate customer experiences and empower business growth. It seamlessly integrates payments to boost efficiency, speed up transactions and improve cash flow.

Optimise invoicing for faster payments. Invoice management is key to positive cash flow. The sooner an invoice goes out to a customer, the faster the business gets paid. Invoicing on time, immediately after products are sold or services are rendered, is paramount.

Even businesses with payment terms of 30 days or longer can motivate customers to pay early by offering discounts or rewards to those who beat the deadline. Digital payments enable faster receipt of payments – for example, by enabling paying an invoice via a QR code sent by text or email. Built-in tools like recurring invoices and automatic notifications can speed payments and ease administrative burden.

Manage inventory and control expenses. Merchants who avoid overstocking are often successful in minimising waste and keeping costs in check while improving cash flow.

Other tactics for managing business expenses may include cutting back on nonessential purchases, engaging in payment-term negotiations with suppliers, and leasing equipment instead of purchasing it to stretch the payments out over time and improve cash flow.

Again, technology solutions can be a powerful tool to help merchants manage inventory. Worldpay 360 monitors stock levels across locations, preventing stockouts and reducing manual stock management, ensuring better product availability, increased customer satisfaction and improved cash flow management.

Build a cash reserve for lean months or emergencies. One of the simplest things to do to help cash flow is to always be saving, but that’s easier said than done, especially during seasonal dips.

Nevertheless, merchants who put money away can be better insulated against troubled times. Creating separate savings accounts with sub-accounts designated for specific savings goals can also help merchants track their savings progress.

For more ideas to manage cash flow, or to learn more about Worldpay 360, contact your Worldpay representative today.