My business nearly collapsed in its first 12 weeks despite strong sales. Poor receivables management and overly generous payment terms almost killed everything. Here’s what I learned.
The Core Motto
A sale isn’t a sale until the money’s in the bank.
I learned this the hard way when suppliers demanded payment while customer funds remained uncollected. The stress was crushing.
Cash Flow Management Strategies
1. Create Cash Flow Forecasts
Map expected inflows and outflows over 12 months. Identify tight periods early so you can guide sales focus accordingly.
2. Manage Receivables Tightly
- Discuss payment terms upfront
- Send invoices promptly with correct details
- Maintain relationships with accounts payable contacts
- Address aging receivables immediately
Don’t be polite about money you’re owed.
3. Revisit Supplier Payment Terms
Negotiate extended payment windows during growth or seasonal challenges. This improves working capital without cost.
4. Trim Expenses Aggressively
Categorize expenses as essential or non-essential. Seek cost reductions through competitive bidding and annual upfront payments.
5. Incentivize Upfront Payments
Offer discounts for prepayment on longer-term contracts. Getting money faster is worth a small discount.
6. Revisit Pricing
Raise prices regularly to maintain margins against inflation and salary increases. If you haven’t raised prices this year, you’ve effectively taken a pay cut.
7. Build Financial Buffers
Maintain 3-4 months of operating expenses in cash reserves. This enables strategic growth and helps you navigate crises without panic.
The Reality
In larger organizations, financial directors manage cash flow. In smaller businesses, this responsibility falls to founders.
Get accountant support. Review management accounts monthly. The boring financial work prevents late-night panic.