February 12, 2020

Cash Flow Tips: Somewhat Profitable but Still Struggling?

Cash flow management isn’t something only for business owners struggling to make a profit. Often times, we find that successful businesses have the hardest time maintaining positive cash flows.

We, as business owners, know that maintaining cash flows can be a constant battle of lows and highs. A never-ending ebb and flow where you seem to always be waiting for that next payment to get you and your team through or pay a vendor. ‘The money is coming, it’s just not here yet’ has become an all too common mantra. Cash flows are business basics, however many of us don’t understand how to get out of the rut and maintain healthy, sustainable, positive cash flows. Now this isn’t something only for business owners struggling to make a profit. Often times we find that successful businesses have the hardest time maintaining positive cash flows. But why is this? As a business, you probably rely on a large portion of your income from invoices. As anyone who uses invoices knows, customers don’t always pay on time, and if they do one month, they don’t the next. This irregularity can lead you to miss payment deadlines to your vendors and suppliers. 

Trying to run a business without managing cash flow is like trying to shoot a target with a blindfold on. Even if you have successful months (with positive cash flow) there are still other months where you can be left scraping by.

Balancing Inflows and Outflows

It can be challenging to balance regular outflows like rent, salaries, and equipment with irregular inflows. Often times, businesses will go through periods of negative cash flow because of the season, economic downturns, or large expenses associated with growing your business.

Achieving a positive cash flow can be a major hurdle for any business owner to overcome. We have some tips. But before we jump into the simple tips, let’s first understand what the cash flow statement is, and how to decipher it’s (hidden) components.

Cash Flow Statement’s (Hidden) Components

((± Operating costs) + (± Asset investments) + (± Financing)) = Cash available

Operating Costs

How much you have made or spent on a daily basis. This includes cash earned for that period and collections of sales previously made on credit, minus all expenses. 

Asset Investments

The cash used to buy or sell long term capital assets. These assets may be machines/equipment, property, vehicles, or furnishings. 


Here you’ll find the cash paid to lenders, creditors, and investors. While this can be a negative number when paying a lender, it can be a positive number when you take a loan or a draw on a LOC.

6 Simple Cash Flow Tips For Balance

Fixing a negative cash flow problem is sometimes as easy as freeing cash tied up in accounts receivable. Sometimes companies take on financing against assets and inventory, however this too can have its problems and only serves as a temporary solution. We have helped small businesses perform better for decades, here are some of the simple tips we have shared along the way.

1. Map it Out

Positive cash flow doesn’t always mean positive profit. Set your benchmark for your break-even point. Lay out all of your expenses and see at what point do your sales actually turn into profit. Remember if you foresee cash shortages in advance, you will have more time to lean on accounts receivable to get paid or possibly take a line of credit.

2. Learn The Basics

Business accounting is not something only for your accountant, it is for knowing your company’s health and future. Learning basic accounting: income statements, balance sheets, depreciation, amortization, and retained earnings, can set you up for success and keep your ear on the pulse of your company.

3. Cash Reserves

We all know that this is easier said than done. It seems like all of your cash is tied up in your business. So how do you maintain a cash reserve if you have no cash on hand? This is something that needs to be taken into account in the months (weeks) where you are flush. Taking that extra money and saving it in a cash reserve (instead of buying that new copy machine), can be critical to see your business through the drought.

4. Get Paid Faster

Let’s talk about those pesky net-30 and net-60 terms that your clients love so much. While possibly necessary at first (to secure their business) they are no longer needed. Your clients already trust and like your product/services, so they need to start paying faster. Keep an eye on receivables and contact customers periodically to collect payments. In some businesses, it might make sense to offer small discounts to customers who pay upfront. Or another technique that has worked, is to assign one person to be in charge of accounts receivable and pay them bonuses based on how many clients he/she gets to pay early. Make sure to have your contracts reflect your new payment terms and stick to them rigidly.

5. Extend Payables

In contrast, get the longest deal (without penalty) you can on payables. Extend your payables to net-60 or net-90 when possible. This will help in keeping a positive cash flow during slower times.

6. Monitor, Monitor, (and yes) Monitor

All businesses have that person on their team, the trustworthy bulldog who doesn’t let anything fall through the cracks. Assign them the job of monitoring your cash flows (yes, your bank account and upcoming payables) and will let you know when the account hits a certain threshold.

Make sure to have this threshold amount high enough that you can still react and deal with the problems before you hit the bottom of the account. (And if you’re a tech person, your bank account should allow you to set alert notifications via text.)

Ultimately it all comes down to keeping a close eye on your business, reducing your receivable terms, lengthening your payable terms, and making sure to spend revenues wisely. You don’t want to spend money you (find out in a month) don’t have.

No more wishing and praying for positive cash flow, maintaining a healthy business is part of a comprehensive small business strategy. Take these tips and apply them to your business today.

About us

Junction Peak is your finance and leadership consulting team. We use accurate financial forecasts and proven tools to help you grow. 

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