Optimize Cash Flow in 2017: Tips for Small Business Owners

With the holidays here and 2017 quickly approaching, many small businesses are forecasting their end-of-year financials and preparing for new challenges and opportunities ahead.

According to Capital One’s latest Spark Business Barometer – a nationwide study of small businesses measuring financial conditions, economic perceptions, hiring plans, and other indicators of small business growth – business owners are expecting slower holiday sales, but feel generally optimistic about current and future conditions in 2017. At the same time, the study revealed fewer businesses are planning to add employees in the near future, with many anticipating challenges related to taxes, technology, and (you guessed it) cash flow.

When it comes to running a business, cash flow can impact just about every aspect of a firm’s financial position and ability to invest and grow, yet many struggle to manage it effectively. Here are a few tips and considerations to help you optimize cash flow management, and ultimately improve your financial position in 2017:

Be Proactive About Collecting Payments

Our survey revealed payment collection is a challenge for at least a quarter of all small businesses. Slow or late payments compromise cash flow and can cause businesses to come up short on funds. Consider proactive early reminders to encourage payments and ensure faster delivery of the cash you’re owed.

Time Payments for More Accurate Cash Positions and Projections

If your customers are taking longer to pay, consider adjusting your forecast accordingly and pushing back your own payments to suppliers to compensate. Set up payment alerts to ensure that you are paying and being paid on time. Text and email alerts are a great way to keep up on all your transactions – things like daily balance summaries, low account balance reminders and more.

Revenue Deductions

If you’re selling a product, your actual versus projected revenue may vary based on the channel through which it is sold. For example, selling through a distributor may result in lower revenue (due to higher fees) than selling directly. Keep your cash flow projections on point by taking into account any deductions you may have from third-party sellers. Reach out to your third-party partners on a regular basis to discuss and negotiate cost savings that might exist.

Inventory and Supply Chain Costs

To avoid over-investing in inventory, consider factoring in the occasional cost of expediting shipments from suppliers. That way, you’ll be prepared to meet unexpected demand without overstocking on products. You may even consider negotiating with suppliers to have them hold an inventory cushion for you during key times like a predictable busy season.

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