A big challenge for business owners is understanding and managing cash flow. But it's an important one to overcome, since a good cash flow strategy will support your business’s long-term growth.

What is cash flow?

Simply put: cash flow is the movement of money. It’s about monitoring the cash coming into your business and balancing it with the amount of cash flowing out.

It’s a common challenge for businesses of all sizes.

“Cash management for small businesses versus large businesses is very similar,” says Chad Clarke, Director Cash Management and Institutional Investments, Business Solutions, Servus Credit Union. “Both have the same needs and challenges when it comes to money – the difference being scale or complexity”

Larger businesses typically require a broader suite of cash management products and services, he adds.

In his role, Chad has noticed some common themes when it comes to cash flow challenges, including:

  • Business owners having very little time dedicated to focus on cash management
  • A lack of access to advice on cash management strategies
  • Historically strong economic conditions driving revenue that compensates for the lack of a cash flow strategy in the short term

Albertans are very familiar with our province's boom and bust cycle. The ebb and flow of our economy can lead to fluctuations in cash flow and cause shortfalls. This creates challenges for businesses that don't have cash reserves to cover their operating costs during these times. That's one example of how a good cash management strategy can make a real difference.

Having an effective cash flow management strategy helps you achieve cost savings, increase financial stability, anticipate problems and maximize results.

A person working at their desk with computer, laptop and calculator reviewing paperwork.

Top cash flow management strategies

Chad says there are a number of things your businesses should focus on to help optimize cash flow.

Streamline accounts receivable using digital services. Use digital tools like commercial photo cheque deposit or Electronic Funds Transfer to collect payments, as opposed to cheques or cash.

Accelerate receivables by using merchant services. Accepting debit/credit card payments makes it easier for your customers to pay you instantly.

Accelerate payables using digital banking services. Make instant payments online versus writing cheques for expenses like payroll and stay on top of your cash position daily.

Choose the right banking plan. Minimize fees and get access to the right products and services for your business, including cash management solutions.

Maximize your return on surplus cash. Take advantage of products like high yield savings accounts or GICs to grow your money.

Other suggestions include regularly forecasting cash flow projections, invoicing right away and offering discounts to customers who pay quickly, as well as optimizing your after-tax income. You may also want to consider securing an adequate line of credit to cover cash shortages or business disruptions.

A great way for your business to employ cash flow management strategies is to meet with a cash management advisor. Together you can identify your cash management needs and implement solutions that work best for your business.