10 tips for excellent cash flow management

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Are you sitting down? Let us share a frightening statistic with you. In a report published by FinFind in November 2020, it was found that 42.7% of small businesses in South Africa were forced to shut down during the first 5 full months of the lockdown.

The research data was comprised in a survey of 1489 businesses across all main sectors of the economy, and so must be understood as a sample of the larger economy rather than an absolute fact. Nevertheless, to think that around 4 in every 10 small businesses closed in this time is worrying.

The reasons for these closures are numerous, but at the end of the day it came down to the availability of funding and cash flow that simply did not last for the hard lockdown months. We also know that some industries were much harder hit — such as the beauty and hospitality industries.

Cash flow management is one of the most important parts of running a successful business. Having cash flow is about more than being prepared for the next pandemic (although it will definitely help). Even during the best of times, the economy is volatile and highly unpredictable. You need to be able to ensure that your business is ready for a couple of bad months (and then preferably a month or two to follow) to be sure of long-term success.

Here are just a few ways in which you can improve your cash flow and ensure that a bump in the road won’t lead to your demise:

1. Create and stay within your budget

The adage goes, “If you fail to plan, you plan to fail” — heed its advice. Without a proper budget, you are already placing yourself at an extreme disadvantage. Speak to your financial adviser about creating an accurate and realistic budget.

2. Reduce smaller expenses and overheads as necessary

While it may be tempting to cut your main expenditures, consider every individual spending avenue first. If you need to cut spending to improve cash flow, start with the things you can go without before you make changes to your staff makeup.

3. Invoice as soon as you can

Many businesses will pay all their bills at a set time every month — if you don’t invoice promptly, you might be the reason your payment and disposable income are delayed. As soon as you’ve delivered a service or sold a product, send your invoice.

4. Raise your prices

Especially if you have established yourself and have been using low prices as a way to attract customers, you cannot be asking the same prices for years on end. Make sure to explain the transition to higher prices to your most loyal customers and ensure them that it is a business decision that will benefit them in the end.

5. Consider working on retainer

Especially if you have a service-based business, having your clients pay a monthly retainer establishes a steady flow of income that ensures that, despite a quiet month, you don’t lose out on payments. Just make sure to deliver when the client is ready to utilise the money spent.

6. Evaluate your inventory

There is nothing that can hold back your cash flow more than being badly stocked. Look at the inventory that isn’t selling and consider discounting your stock to get rid of these ‘trapped’ assets. Taking stock is not exclusive to products, though. If you offer services that are not utilised, it may be best to stop investing time and effort to continue pushing resources into a dead-end.

7. Accept credit cards

If you accept credit cards, it improves the chances of purchases and gives you access to fewer bad debts since your payment isn’t reliant on the customer/client. Keep in mind that a fee will need to be paid to the credit card company for every purchase, so there are some drawbacks.

8. Request some money upfront

For larger projects and more valuable sales, consider asking for an upfront payment with regular instalments thereafter to ensure that you don’t have a cash flow shortage because of delayed payment or issues on high value transactions.

9. Investigate your supply chain

Perhaps you are paying too much in your supply chain, so consider your vendors carefully — some may even consider providing you with a better agreement based on your loyalty or bulk purchasing. Some vendors may simply be asking too much and there may be suitable alternatives where you can reduce your spending and improve cash flow.

10. Speak to your financial adviser

Decisions on improving cash flow should not be taken lightly, especially since cash flow and money management are the central engine of any business. Always speak to your financial adviser who will be able to give you unique insights and specialist advice based on your business’s needs and circumstances.


  • FinFind SA SMME COVID-19 Impact Report

  • Disclaimer:

    This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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