Tips for Managing Cashflow for Your Small Business — How to Smooth Out the Financial Roller Coaster

Running a small business can often feel like a financial roller coaster, with highs and lows that can make managing cash flow a challenge. At Fidelity Bank, we understand these challenges and are here to help you navigate the ups and downs with some practical advice and support.

Ready to get off the rollercoaster? Let’s get started!

Get to Know the Flow
The first step in managing cash flow is understanding it. Cash flow is the money that moves in and out of your business. Positive cash flow means you have more money coming in than going out, while negative cash flow indicates the opposite. Regularly reviewing your cash flow statements will give you a clear picture of the financial health of your business.

Forecast
Not for the weather, but for your cash flow. A cash flow forecast can give you good insight into your business’s financial future. Estimate your incoming cash from sales and other sources and compare it to your outgoing cash for expenses such as payroll, rent, and supplies. While not perfect, this exercise can at least help you anticipate and prepare for periods of low cash flow.

Stay On Top of Receivables and Payables
Efficiently managing your incoming and outgoing cash can help you maintain a steady cash flow. It’s one of the easiest things to optimize and it’s often overlooked.

• Invoice ASAP. Send invoices as soon as work is completed or products are delivered. The sooner you invoice, the sooner you get paid.
• Set Clear Payment Terms. Be sure to set a payment date when invoicing your goods or services.
• Follow Up on Overdue Invoices. Don’t hesitate to follow up on overdue invoices. Regular reminders can remind clients to pay on time.

Build an Emergency Fund
Building and maintaining a cash reserve is essential for managing unexpected expenses and smoothing out the cash flow rollercoaster. As with a personal emergency fund, try to set aside enough money to cover at least three to six months of operating expenses.

Manage Your Inventory
Too much inventory can tie up cash that could be used in other areas of your business. Regularly review your inventory and see if you can identify sales patterns. Consider implementing an inventory management system to help you better manage it.

Get Control of Costs
Regularly review your expenses and look for areas where you can cut costs without negatively affecting the quality of your products or services. Try negotiating better rates with vendors and reduce any unnecessary expenses.

Use Financial Tools and Services
Business credit cards and lines of credit can provide short-term financing to cover gaps in cash flow. Accounting software can help you track your finances and provide you with up-to-date financial reports.

Look Ahead
Finally, do your best to plan for the future. Regularly review and adjust your cash flow forecast and try to identify times when sales might be lower so that you’re better prepared to handle the dip. Staying proactive can help you smooth out the financial roller coaster and set your business up for long-term success.

Get Professional Advice
We’re always here for you. Managing cash flow can be complex, but you don’t have to do it alone. At Fidelity Bank, our Business Banking Team is here to provide personalized support and guidance. We can help you develop a cash flow management strategy tailored to your business’s unique needs and goals. No matter what challenges you face, we’ll work together to help you build a stable, healthy financial future for your business.