Cash flow, by the Investment & Finance Dictionary means: The process of planning a company’s schedule for paying bills and estimating when income is likely to be received. Cash flow management helps a company avoid damaging its relationship with creditors by not paying bills on time and being forced into bankruptcy.

In the world of business, cash is and should always be King. Because there is a gap between the time you receive goods and services from your suppliers and the time you receive money from your customers, you need good cash flow management.

Measure your cash flow

Planing without measurements or indicators is simply a guessing game. Cash flow for the next years, months or weeks should be prepared based on a series of factor such as: Customers’ payment histories, your own thoroughness at identifying upcoming expenditures, and your relationship of trust with your vendors. Do not assume that things will continue to flow at the same rate but identify exterior factors such as global economy, weather or else, that can also affect your cash flow.

Your cash flow sheet should start with the previous season’s balance and you will add up all your receivables to this amount. Make sure you do not leave anything out from this list: interest earnings, service fees, customer payments…

It is also very important to identify where the cash is going. Have a line item on your projection for every significant outlay like: rent, inventory (when purchased for cash), salaries and wages, sales, equipment purchased for cash etc…

Set clear indicators in order to know when the business is doing good and when you are in the red. This will allow you to take the appropriate actions at the right time to avoid important setbacks.

Improving Receivables

In order to keep the business going, you must sometimes accept the fact that you will not receive cash right away from all customers. Fortunately, there are ways to minimize the tardiness and make sure that your cash flow does not suffer too much from late payments.

  • Issue invoices as soon as the customer desires to place the order
  • Ask customers for deposits in order for them to place orders
  • Offer special discounts to customers who pay on time
  • Make sure you have a department or an employee responsible for follow-ups with clients
  • Apply late fees

Well managing your payables

  • Take advantages of payment terms. If a payment is due in 2 months, (unless you have an amazing cash flow and are ready to pay immediately) do not pay in 1 month. Take advantages of your terms. (Without being late of course!)


  • Choose your suppliers wisely. Do not focus on the lowest cost but seek advantages like trust, loyalty, rapidity of delivery, the % of damaged goods, their flexibility and more.


  • Make sure your company is always in communication with your supplier so that you are always on the same page for delivery dates and payments.


Cash Flow is the backbone of your business so it is important to keep it alive and healthy. Do not hesitate to put pressure on customers who do not pay on time and make sure you are always on top of things. Of course, things happen and you might find your cash flow affected by late payments, fees asked by your suppliers or mistakes in payroll. The most important thing is to identify these slip ups as soon as possible and find solutions. Pay your debts on time instead of letting them accumulate. The better the cash flow, the sooner your business will strive.

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