Cash flow problems kill more businesses than lack of profitability. You can be profitable on paper but still fail if you can't pay bills when they're due. Effective cash flow management is the difference between sustainable growth and crisis management.
Essential cash flow strategies
1. Accelerate receivables
Getting paid faster dramatically improves cash flow and reduces reliance on credit facilities or reserves.
- Invoice immediately upon completion
- Offer early-payment discounts (2% for 7 days)
- Make payment easy (multiple methods, online portal)
- Follow up overdue invoices within 3 days
2. Manage payment timing strategically
Pay suppliers on time to maintain relationships, but don't pay early unless incentivised. Use the full payment terms available.
3. Forecast cash flow weekly
Create rolling 13-week forecasts updated weekly so you can anticipate shortfalls weeks ahead and act before a crisis hits.
4. Maintain cash reserves
Aim for 3-6 months of operating expenses in reserve. This buffer protects against downturns and gives you confidence to invest.