Cashflow Management Tips for Small Businesses

Brought to you by Capital on Tap:

Across the United States, approximately 4.4 million businesses launch each year. In 2022, this saw the total number of small businesses in America rise to 33.2 million. However, due to cashflow management problems, research shows that 82% of small businesses do not survive.

Owning a small business is by no means easy, but many businesses thrive with the right financial support. If you’re hoping to learn more about managing your cashflow to guarantee business success, we share our top cashflow management tips for small businesses in this guide.

Review Business Profits

First in our cashflow management tips for small businesses is reviewing business profits. As a business owner, it’s normal to experience fluctuations in business profits. After all, many external factors, such as the economy, can affect sales regardless of whether you operate on a business-to-consumer or business-to-business basis.

But to survive in the competitive business landscape, a steady, not to mention increasing, return on investment and net profit can support business growth year on year, which means reviewing business profits is important.

When you review your business profits, you’ll be able to manage your cashflow better and identify whether any adjustments in your spending could be required. You’ll also have the opportunity to assess what’s currently going well and what you could do to further increase your profits.

Assess Business Expenses

In addition to reviewing business profits, assessing your fixed, recurring, and non-recurring business expenses is equally important. For example, how much does your business spend on office equipment each month? How much do you need to set aside for tax? How much do you spend on marketing? What about employee salaries?

After assessing your business expenses and tracking payments, you’ll have greater insight into the total sum of your monthly and annual costs compared to monthly and annual profits. With this information, you can determine how much net profit you’re making and whether you need to reduce expenses to increase cashflow.

Likewise, assessing your expenses could highlight that your expenditure is lower than you thought. If it is, this offers you an opportunity to consider how to increase investment within your business.

Create a Cashflow Plan

Next in our cashflow management tips for small businesses is creating a cashflow plan or cashflow forecast. Beneficial regardless of whether a business has been operating for one or ten years, cashflow plans enable business owners to plan for future income and expenses and determine financial projections across a number of months or years.

If you’ve not already created a cashflow plan, doing so comes highly recommended. In fact, Damian Brychcy, COO and US MD of Capital on Tap, says: “In today’s challenging business landscape, it’s essential that small businesses keep on top of their profits and expenses in order to ensure survival. From COVID-19 to recessions, many economic factors have and continue to influence the financial performance of businesses. While many businesses bounce back, increasing expenses coupled with decreasing profits significantly influence business success. By proactively leveraging cash flow plans, businesses can better prepare for any internal and external factors that could hinder their profits or cause financial hardship.”

Of course, it’s not always possible to anticipate cashflow. This is especially true when considering non-recurring business expenses. But with a cashflow plan, you can determine how much net profit is available to navigate any unexpected problems, such as the termination of a client contract, and where and when investments can be made, for example, in hiring new staff.

Consider a Business Credit Card

While you may not realize it, business credit cards can also be beneficial when it comes to cashflow management. Most business credit cards, such as the Capital on Tap Business Credit Card, issued by WebBank, also offer numerous benefits that can contribute to business growth.

Damian Brychcy adds: “The Capital on Tap Business Credit Card, issued by WebBank, offers a wealth of benefits designed for small businesses with annual revenue of at least $30,000. Beyond offering access to credit that facilitates the creation of a steady cashflow, the card also comes bundled with cashback rewards. The icing on the cake is that small business owners can enjoy all these benefits without the burden of annual or foreign exchange fees!”

To Conclude

From frequently reviewing business profits to creating a cashflow plan, our cashflow management tips for small businesses can be employed at all stages of business growth. With these tips in mind, it may be time to assess your current cashflow to determine whether you need to make any changes within your business. If you do, remember that taking advantage of a business credit card could have many benefits.