8 Proven strategies to improve cash flow in your business

Want to improve business cash flow fast? Start with a budget.

A budget will serve as your roadmap for anticipated income and expenses. Creating a budget ensures businesses can plan and allocate resources effectively and that sufficient funds are available to cover operational costs, investments, and any unexpected expenses. You can develop a budget based on historical data, industry benchmarks, and projected growth or changes in the business landscape.

However, a budget alone is not enough. Regular monitoring and comparison of actual cash flow against the budgeted figures are essential. This allows businesses to identify variances, pinpoint areas of concern, and promptly adjust their strategies if necessary. A good budget management solution can help.

Consistent monitoring also enables businesses to stay on track, make informed decisions, and adapt to changing circumstances. This allows them to keep a finger on the pulse of the business and maintain a healthy cash flow and financial stability.

Poor inventory management can crush any cash management strategy in place. Why? Because excess inventory ties up capital that could be used elsewhere. By maintaining optimal stock levels, companies can free up cash for other operational needs or investments.

So what are some strategies for efficient inventory management?

• Implement just-in-time systems, where inventory is replenished only as needed.

• Employ forecasting techniques to anticipate demand accurately, which minimizes the amount of cash tied up in excess inventory while ensuring sufficient stock to meet customer demands.

• Leverage inventory management software and analytics to track stock levels, identify slow-moving items, and make data-driven decisions regarding procurement and production.

By embracing leaner inventory practices, companies can save precious cash through reduced storage costs, lower carrying costs, and minimized risk of obsolescence or spoilage.

Another way to improve your business cash flow is to get paid for your products or services faster. When customers delay payments, these outstanding accounts receivable create a cash deficit that can disrupt operations, limit growth opportunities, and strain financial stability. Implementing strategies to collect receivables promptly is crucial for maintaining a healthy cash flow.

A proactive approach to receivables management is essential for maintaining financial stability and enabling growth. Some easy, proactive ways to accelerate collections include:

• Setting clear invoicing terms

• Offering discounts for early payment

• Implementing late payment penalties

Businesses can also leverage automated invoicing and payment reminder systems to streamline collections. Additionally, establishing a robust collections process, with dedicated personnel or outsourced services, can ensure timely follow-up with delinquent customers.

By prioritizing the efficient collection of receivables, businesses can minimize the impact of outstanding customer debts and free up funds for reinvestment, operational expenses, and strategic initiatives.

Another solid cash flow strategy to negotiate favorable payment terms with vendors. It’s simple: The more time you have to pay vendors, the longer you can keep cash on hand. This allows you to allocate funds more strategically and mitigate any potential cash shortages.

To negotiate effectively, leverage your value as a customer, highlighting the potential for increased sales or a long-term partnership. Additionally, offering incentives such as early payment discounts or larger order volumes can incentivize vendors to grant more favorable terms.

One thing to note: It's crucial to maintain a respectful and collaborative approach during negotiations, as positive vendor relationships are essential for long-term success. Open communication, transparency, and a willingness to find mutually beneficial solutions can go a long way in securing payment terms that work for you.

Carefully balancing cash outflows through negotiated payment terms will help businesses better manage their cash flow, reduce financial strain, and effectively allocate resources for things like growth and operational objectives.

One of the most impactful ways to improve your cash flow management is by automating financial processes.

Manually entering data, processing invoices, and paying bills can be time-consuming and prone to errors, leading to delays in cash inflows and outflows. By embracing accounting automation, businesses can streamline these processes, saving time and improving accuracy.

Financial management software solutions like Brex and FreshBooks offer automation capabilities that can impact cash flow management. These platforms automate invoicing, enabling businesses to send invoices promptly and reduce the time it takes to collect payments. Additionally, accounts payable automation software ensures that vendor payments are made on time, helping maintain positive relationships and avoiding late fees.

Brex, in particular, offers a comprehensive suite of tools designed to streamline financial operations and improve cash flow. Our spend management software automates expense tracking, receipt capture, and reconciliation, ensuring accurate and up-to-date financial data. Additionally, our native accounting integrations enable seamless syncing with popular accounting software like Sage Intacct and QuickBooks Online, reducing manual data entry and potential errors.

Overall, financial process automation not only streamlines cash flow management but also provides businesses with more accurate and timely financial data, leading to:

• Improved accuracy of financial records and cash flow projections

• Enhanced productivity and flexibility with precious resources

• More informed, real-time decision-making

Securing a business line of credit can be a valuable safety net for companies, providing access to funds when needed to cover unexpected expenses, seasonal fluctuations, or bridge cash flow gaps.

When securing a line of credit, businesses should consider factors such as interest rates, fees, and their creditworthiness. However, it's crucial to use a line of credit responsibly, treating it as a last resort and maintaining disciplined repayment to avoid accruing excessive debt and interest charges. Responsible utilization can help businesses weather financial challenges and maintain steady cash flow.

Further, it’s often a good idea to secure a line of credit before you actually need it. That’s because you’re much more likely to get better terms when your business is financially healthy and cash flow is strong. And you’ll have access to funds when you need them most.

A proactive approach will help protect your cash and maintain financial stability, which is why identifying and mitigating potential risks is crucial. Economic downturns, customer defaults, or supply chain disruptions can greatly affect your ability to generate and manage cash flow.

Proactively analyzing these risks allows businesses to implement strategies to minimize their impact. Some ways to mitigate that risk include:

• Building a cash reserve

• Diversifying your customer base

• Securing backup suppliers

Additionally, developing contingency plans and stress-testing financial projections can help your business prepare for potential disruptions.

By taking a proactive approach to risk management, companies can safeguard their cash flow, maintain operations, and navigate challenges more effectively, ultimately fortifying their financial resilience.

Finally, it's essential to review and update your cash flow management plan regularly. Businesses evolve, market conditions shift, and new operational challenges emerge.

Regular reviews allow you to assess your financial performance, identify areas for improvement, and adapt your strategies accordingly. By continually monitoring and adjusting your cash flow plan, you’ll ensure it remains aligned with your current business needs, goals, and an evolving economic landscape.

Ultimately, it’s important to never let your guard down when it comes to cash flow management. Keeping a close eye on your business finances will help you identify potential issues early, seize new opportunities, and maintain the strong cash flow required for long-term growth and success.

It’s important to always stay on the offensive when it comes to your business cash flow.

To better optimize your cash flow, stay ahead of the game with strong budgeting, inventory management, receivables collection, and securing a credit line. You can also make meaningful gains through vendor negotiation and process automation. And don’t forget regular risk analysis and review of the cash flow plan.

Sign up for a demo to see how Brex can improve business cash flow by automating your core financial process, including invoices and bill payments.