Improve Your Business Cash Flow

The cash flow of your business reflects the money coming into your business and out of your business. At the end of the day, your goal is to have a positive cash flow, showcasing liquidity in your business which enables you to settle any outstanding debts, invest in capital expenditures or future growth for the business and have a buffer for future unknowns. A simple way to help you improve cash flow is by better understanding and managing the inflow and outflow of money in your business.


Cash flow is different from net income. Net income is designed to showcase profit versus loss of your company. However, cash flow is made up of more elements such as accounts receivables, inventory, accounts payable, capital expenditures and other items – many of which are not visible on your income statement. For example, it is possible for a business to have a positive net income, but not have enough cash available to pay current expenses. This is why it is important for businesses to create a cash flow schedule, ensuring they have enough funds available at any given time to cover expenses.


A cash flow projection will help you create a short-term forecast to determine how you are going to bring money into your business and how you are going to pay expenses. To get started, look at the last six months of actual results from your business:

  • What are your company’s common revenues and expenses?
  • Are they at levels you expected?
  • Are they at the frequency you expected?
  • How long is it taking to get paid?

As you look into the future of your business, do you foresee any changes that will affect your cash flow in a significant way? Significant changes/impacts can include increase or decrease projections such as:

  • Sales volume of goods or services
  • Price changes of goods or services
  • Frequency of paying expenses
  • Bringing in equity or financing
  • Implementation of platform/process to collect payments quicker
  • Selling of an asset

Note that a cash projection is never 100% accurate. As you evaluate and determine your projected cash balances, understand the goal is to come in better than projected, so be conservative when in doubt. Once complete, monitor your cash flow with a cash flow statement.


  • Evaluate your customer or supplier invoice terms. Are you enforcing late payment penalties or rewarding for early payments received? This will help narrow the gap in receiving outstanding invoices.
  • Enforce good account payable practices in your organization. Is your organization meeting payment deadlines, avoiding late payment penalties?
  • Evaluate your current inventory amounts. Based on your customer buying behavior, even seasonally, do you have appropriate funds tied up into inventory? Do you have too much funds tied up in inventory that is only purchased occasionally?
  • Require deposits on large or custom orders. Requiring a deposit will decrease your risk of financial loss in the case the buyer backs-out and also provides you with liquidity up-front to produce the items.
  • Utilize subscription sales. Many industries are migrating to subscription sales, as it helps you secure instant cash flow for the future and easier scheduling.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.