10 cash management tactics to support small business growth

An international sportsman once told me not to be embarrassed about talking about money, writes blogger Stuart Pearcey. Easy to say, but it can be hard to do. But for small firms it’s a skill that must be learned when it comes to cash flow. Here are ten simple ideas to help you over the hurdle of financial embarrassment.

  1. Deal with small firms. By dealing with small firms you’re better able to get close to the people who approve the payments. They’re less likely to hang you on for payment than big firms with convoluted – and therefore slow – internal processes developed in their interests, not yours.
  1. Spread the load. Dealing with lots of small firms rather than a couple of large ones spreads your exposure to risk. Losing one of ten small clients is easier to survive than losing one of just two.
  1. Look for cash up front. Why should that idea be so shocking? If a new client has approached you it’s not an unreasonable request, and we’re used to paying up front for groceries and things we buy on line. Even so, you should always tread carefully, and do your due diligence. A credit check is a must, isn’t hard to do, and is so important. As online credit check company CreditHQ says: “Don’t let your business be involved in someone else’s financial troubles.” It’s too easy to be suckered in by a good story, well told. Upfront payment doesn’t have to be for ever. Once mutual trust has been built, you could consider extending credit terms, if you think it appropriate.
  1. Get on with invoicing. Why wait until the month end to do a batch of invoices covering work that wasn’t paid for up front? Doing so is another way of extending credit to your customers – and delaying payments to you. Hardly their fault; the ball’s in your court on this one.
  1. Make paying easy. Online options for payment are many and varied these days. Pick a range of options, so there’s sure to be one of them that your supplier is comfortable with. Always remember to factor in any cost of operating those systems into your costings.
  1. Don’t climb the greasy pole at others’ expense. Acknowledging that consistent positive cash flow can help a business owner pay expenses, invest in new opportunities or grow a business, Wells Fargo Exec Vice-President Lisa Stevens immediately suggests pushing back payment of vendor invoices for 60 or 90 days to make that possible. I’d suggest that’s a shabby tactic which hampers vendors from paying their own expenses, investing, or growing their own businesses. You’re not a bank; don’t let big firms treat you as a source of interest-free credit.
  1. Don’t be embarrassed about talking money. If you’re owed funds, and payment is overdue, hit the phone. Chase someone up. Make a nuisance of yourself. It’s your money we’re talking about, so don’t be afraid of asking for it. Will it harm your supplier status? Maybe. But can you afford to work for anyone who doesn’t pay your bills? No. Better to have no work at all than work you can’t get paid for. At least you can use the available time to scout out better opportunities. And on the same subject, don’t be afraid to re-examine pricing. Costs change, and your pricing structure needs to change accordingly. If you think an increase is justified, ask, and explain why you’re putting the question.
  1. Join a networking group. Or join two. These present great opportunities to build relationships with people who might need what you supply. Maybe not today, or next week, but eventually. And they’re likely to talk to others who might need your help. I’ve built long-term business relationships over croissants and coffee in just such situations.
  1. Keep the good employees. If there’s a downturn in your industry don’t immediately thin out the workforce. Doing so will cause resentment and reputational damage, and then when the upturn comes – and it will – you won’t have the people to help you take advantage of it. Explain stuff to the workers; negotiate short-term wage reductions, or seek financial support from third parties to tide you over.
  1. Build a cash cushion. Forecast your cashflow, and predict, as far as you can, when it might happen in the year ahead. Modify forecasts on a regular basis and seek to hold cash reserves built in the good times to cover costs when things get lean. Measure expenditure carefully, using online expense management software like
    Solo Expenses, which will present a minute-by-minute position of your financial position, and allow you to build a complete picture of your company’s financial health. What’s more, it’ll do so in a way that has a positive impact on your cashflow, because it’s a more powerful tool than its cost might suggest. Check it out now.