Sat Jun 6, 2020 | | Cash Management

Cash Management Strategies: 10 Things You Need To Know


When it comes to business, cash flow is king. The money you have at your disposal at any given time, without the burden of debt, is oftentimes what makes the difference between success and failure.

Here are 10 cash management strategies that you probably didn’t even know existed:

1. Pay Close Attention to the Details

The number one cash management strategy for any professional should be starting a daily cash report. This will be how you keep your finger on the pulse of your finances.

It’s pretty hard to manage something unless you measure it first, and a daily report is the perfect measurement tool for cash management. Not only does it give you an unbiased look at your daily financial activities, but it will also reveal changes and patterns you might have missed before. This will give you the opportunity to fine-tune your company to perfection.

Also, consider checking your daily cash report against AR (accounts receivable) and AP (accounts payable) every week.

2. Ask for a Deposit Upfront

If you aren’t already, you should start asking every client or company you work with for an initial deposit or milestone payment in order to secure your services.

Some clients might give you push back on this and you can decide if you want to bend the rules for some people. More than likely you will find most customers do not mind securing services with a deposit as long as they feel like they can trust you to deliver on-time with accuracy. Doing so will give your company an immediate boost in cash flow.

3. Don’t Settle for Late Payments

Many professionals and business owners fall into the late-payment trap with their clients. But you can avoid this common pitfall by doing the following:

  • Double-check each invoice before sending it
  • Ensure invoices are being sent to the right department
  • Include a specific due date (NOT net 30)
  • Call clients BEFORE payments are due with a friendly reminder

And if you do find yourself getting multiple late payments, make sure you look into what exactly is causing the problem. Late payments can be the result of many different things, some of which can be extremely hurtful to your bottom line and your company. Finding the root cause of the issue should always be the top priority when running into this type of cash flow problem.

4. Lower Your Operating Costs

One of the most effective cash management strategies is to cut or delay expenses as much as possible. Now, this process will look different for every company so it’s important to understand what your business can and cannot live without.

Here are some cash management strategies that might help you reduce your spending:

  • Outsourcing or contracting
  • Hiring part-time employees
  • Telecommute with virtual technology
  • Cancel unwanted/unneeded services
  • Invest in affordable marketing materials

The truth is, there are a hundred different ways to reduce your operating costs regardless of the industry you’re in. Take a good, hard look at what your company is spending money on and commit to cutting corners without losing any quality in your work.

5. Negotiate with Vendors

One of the most commonly missed cash management strategies is to negotiate with vendors who you regularly conduct business with. Mutually deciding on new payment terms, lower fees or extended payment cycles could make a huge difference in your cash flow and net.

And don’t be hesitant to ask your vendors for new terms, multiple times if needed. Sometimes, a little persistence goes a long way. To be as successful as possible, focus your attention on vendors who you have good, long-standing relationships with and you’ll find out that they are willing to work with you more times than not.

6. Get Rid of Unused Equipment

When it comes to cash management, you have to get creative if you want to see results. Look around your warehouse or office to collect any and all unused equipment. A good rule of thumb here is: if you haven’t used it in 6 months, you can probably go without it…for now at least.

Get stuff moving off your shelves and use the proceeds to fund new and exciting ventures within your company. If you end up needing a piece of equipment you sold during this process, check your local classifieds, such as Craigslist or let go, to quickly and cheaply replace whatever it is you’re missing.

7. Increase Your Margins (if possible)

If you want to see your business raking in more cash, think about increasing the cost of your services and/or goods. If you’re unable to increase the price of your services, see if you can reduce your manufacturing and/or delivery costs.

Increasing your margins isn’t easy, it might not even be a possibility for your business. If you can manage to successfully apply one of these cash management strategies, you will like to experience long-term growth and expansion within your company.

Just remember: When trying to increase margins, you are walking a fine line and you never want to sacrifice quantity for quality.

8. Sell Your Invoices

Commonly referred to as invoice financing, selling your invoices is one of the quickest ways to increase your cash flow as a B2B company.

Selling your invoices to a third-party company lets you collect the cash upfront rather than waiting the entire 15,30 or 60 days as agreed upon in your invoice terms.

Invoice factoring, as it is sometimes referred to, can be incredibly beneficial to your company as a whole. Although, it does take a bit of research to understand how it all works. Still, it’s well worth the effort considering the rewards.

Here are some invoice financing tips from Nerdwallet to help you get started.

9. Open a Money Market Account

Good cash management strategies aren’t always about immediate gratification. It’s vitally important to build nest eggs as your business continues to grow. A money market account is good for this because it gives you the chance to build interest without losing access to your money.

10. Invest in CDs

Similar to a money market account, a CD will earn you interest so you can increase your cash flow. On the downside, you will be penalized for early withdrawal should you need access to your cash. You can avoid this by investing in smaller amounts that yield less interest but also frees up your cash on a more frequent basis.

Final Note

Cash management strategies are plentiful, but not all are created equal. Consider the strategies mentioned above and choose carefully which ones to implement in your company. Once you come up with a solid plan, the details will take care of themselves.