5 Ways to Manage Cash Flow and Grow Your Business

October 23, 2020

Living month-to-month is a tough way to run a business, yet so many entrepreneurs do.

Cash flow problems are often unpredictable. In the U.S., it’s one of the biggest reasons small businesses fail. In fact, according to SCORE, 82% of small business failures are due to cash flow issues.¹

If you never know when the money’s coming it, it can be incredibly tough to keep your business afloat through normal times, let alone in tough times. Sure, you could save profits from better months to keep you alive during the less lucrative ones — but there’s always a sneaky expense, like a cracked windshield or a transmission failure on one of your vans, hiding around the corner just waiting to wipe out your savings.

Add on an unexpected event like a pandemic, and you have the perfect storm.

To safeguard your business from cash flow issues, it makes sense to have a plan. Experts agree that the following steps are essential to managing your cash flow so that you have enough day-to-day operating cash, a reserve for meeting unexpected needs, and enough resources to support growing your business:

1. Get your billing system in order

For small businesses and self-employed people like owner-operators, unpaid receivables are often at the heart of the cash flow issue. According to a QuickBooks report²:

     59% say they have big customers who don’t pay on time
      8% of self-employed report more than half of their customers pay late
      4% of business owners carry over half of their receivables 30+ days late

Stressing out about having enough cash to run your business is one thing. But, given the fact that small business owners tend to mix business and personal finances, the issue often spills over into personal lives as well. Many small business owners admit to having lost sleep over missed payments, and 22% say it has prevented them from expanding their businesses.³

Bottom line: you must find a way to get customers and clients to pay on time. 

Start with clear and timely communication.
You’d be surprised at how many small business owners don’t get around to invoicing clients until weeks after the job is completed. Set aside time at the end of each month for this task. And be sure to clearly note your terms right there on the invoice.

Many small business owners use software to help them track their invoicing and receive payments. Software programs can send out payment-due reminders to your customers at specified intervals, and some even permit you to receive credit-card and debit-card payments online for a small fee. You can even program the system to give customers a small discount for early payments.

This kind of automation takes some of the organizational onus off of owners. However, low-tech options abound too. You could manually create calendar reminders online, or even use a wall-mounted calendar and sticky notes to track invoicing.

Whichever option you choose, stick to it. Having an effective invoicing and payment system not only helps you run your business, but it also trains your customers to prioritize your payments. Who doesn’t like being first in line when it comes to getting paid?

2. Negotiate the best possible terms for your own debts

We know — that advice is a bit of a double-edged sword. When the roles are reversed, we sure do like having some flexibility with payment dates.

However, as a business, it’s your responsibility to prioritize paying your suppliers on time. What you should focus on instead is negotiating favorable payment terms. If you have a good on-time track record with your suppliers, they may be more willing to give you more flexible terms — and perhaps even a discount — on the money you owe them.

External financing can help here, too. If you know a big payment is coming to you in a week, using your fuel card to pay your mechanic today is totally reasonable. Keeping on good terms with your suppliers and partners is critical to the health of a small business, and credit can help keep those relationships smooth.

3. Leverage your fleet card to stretch your cash

If you operate a small fleet, you’ve got an advantage other SMB owners don’t: You can tap a fuel card to help you pay not just for gas, but also for fleet-related expenses such as repairs and maintenance in many cases. Using a fuel card can restore some order to your operational cash flow, but it does require balance. And it requires a fuel card that includes repair and maintenance as part of the package.

Fuel cards can offset some urgent expenditures, but even the most understanding and flexible of lenders come a-calling sometime. You’ll need to be able to project when your money is coming in so that you can manage your debts effectively. Without a clear picture of your financial situation, using any kind of credit to float your business expenses can be risky.

4. Optimize fleet expenses

A corporate fuel card isn’t only an extension of your budget. It can also get you discounts on routine expenditures like fuel, tolls and maintenance. Even if individual rebates feel small on their own, they really do add up over time. As a small business owner, you know very well the importance of taking whatever breaks you can get.

It may be tempting to postpone routine vehicle service and non-emergency repairs. Don’t. Respecting a maintenance schedule is important when your business depends on a fleet. If you push a vehicle until it breaks, the expense is almost guaranteed to be monumental. Doing your oil and brake changes when you’re supposed to really can help fend off unpleasant surprises. As an organizational tool, consider using your fleet card as the dedicated channel for managing all fleet-related expenses.

Besides helping you keep your fleet in tip-top shape, a fuel card program provides crucial data to help manage your business. With a fuel card you can control, manage, and track fuel expenses across multiple vehicles and drivers. It will also help your business prevent fraud and misuse by allowing you to customize fuel purchase controls. You’ll get all-n-one fuel expense tracking, eliminating the need to manage cash, checks, and paper receipts.

5. Plan ahead for big bills

Of course, there’s only so much a fuel card can do. You still need to develop a strategy to manage major planned expenses, like the purchase of a new vehicle or expanding your business. Doing this well takes time. Advanced planning gives you the flexibility you need to save up, move money around, and — most importantly — plan for your future.

If your current fuel card isn’t giving you what you need, check out FleetCardsUSA’s Recommendation Engine and find the card that best fits your fleet.

¹Sutter, Brian. ”The #1 Reason Small Businesses Fail – And How to Avoid It.” SCORE.org. 1 June 2019. www.score.org/blog/1-reason-small-businesses-fail-and-how-avoid-it. Accessed August 19 2020.

²Higley, Danielle. “New report reveals cash flow struggles of small businesses and self-employed.” QuickBooks 6 September 2018. quickbooks.intuit.com/r/cash-flow/cash-flow-small-business-self-employed/ Accessed August 17, 2020.

³Ibid.