Cash Flow Management Tips for Businesses in 2022
When you start a business, there’s no shortage of advice for how to manage your cash flow, and it can seem confusing.
As your business grows, explore tools that offer more in-depth data based on your business’s linked accounts. To avoid adding extra time to your schedule, start with a simple system that includes tools and services to track your cash flow in and out of your accounts.
Cash flow management matters
Only about one in three new businesses survive a decade or longer, according to the U.S. Small Business Administration (SBA) and about half make it to the five-year mark.
Entrepreneurs often get so busy running their businesses that they may overlook cash flow management. But without keeping a close eye on account balances, an owner can quickly lose track of their expenses and other financial benchmarks, leading to business difficulties or even a closure.
Small business cash flow management doesn’t have to be difficult. You can create a workable system to stay on top of your cash flow on a day-to-day basis with just four components.
- Track accounts: Most small businesses have a business checking account. You may also have other business accounts. On a daily or weekly basis, you can track the transactions going into and out of your business bank accounts, using an online or paper register. Each month, you will want to reconcile your business bank accounts by comparing the bank statements with your own records and correcting any discrepancies, according to the SBA.
- Categorize expenses: As you track business expenses coming out of your bank accounts, categorize them under headings such as marketing expenses, loan repayment expenses and inventory expenses. By keeping your business expenses categorized, you’ll be able to prepare upcoming annual budgets and look for areas to reduce spending.
- Create room for reserves: To avoid cash flow problems, it’s a good idea to build reserve funds into your operating budget. If all your profits and revenue are going back out to cover expenses, an unexpected expense could pose a cash flow emergency. Instead, set a goal for the amount of money you would like to maintain in reserves. Each time you track account transactions, check to make sure your balance hasn’t dipped below your goal. If your reserve fund drops below your minimum, you can work to cut expenses or increase profits until you can raise it again.
- Set (and track) short-term goals: On a quarterly or monthly basis, set goals for sales volume and profits. Each month, when you reconcile your bank accounts, take time to track your progress toward your short-term goals and adjust as needed.
Consider automating cash flow management
Small business owners can track their finances manually, with spreadsheets or on paper. But automation can help simplify cash flow management, while eliminating the possibility of manual errors.
Kabbage Insights helps you get a handle on your cash flow at just a glance. This easy-to-use service offers fast, free cash flow forecasting and allows you to securely:
- See your linked business accounts – in one place.
- Recognize patterns using data based on your business accounts
- Plan for the future with balance forecasts
Want to simplify cash flow management for your business? Learn more about Kabbage Insights and how it can help you make informed cash flow decisions.