Global Matters

13 cash flow tips every business owner should know

Janelle Haskell, owner of Mocha Mocha Espresso bar, smiling and holding a cup of coffee

Janelle Haskell was a teenager when she started working at Mocha Mocha Espresso Bar, located inside John Muir Medical Center in Walnut Creek, CA. She’d come back during summers from college and always loved “being a bright spot in people’s day.” “It’s a really special place because you’re helping people in the toughest time in their life,” she said.

Years later, the owners, a retired couple, were ready to sell and made Haskell an offer she couldn’t refuse. “They asked, ‘What if we did a lease to own, where you don’t have to get a loan from the bank?.” The turnkey approach was appealing for a 26-year-old first-time business owner. “I didn’t need a dime,” she says about getting started. “And what’s great about a coffee shop is that it’s just dollars in and dollars out so there is very little overhead.”

But when the hospital mandated a no-visitor policy during the pandemic, her coffee shop, which catered to hospital staff and visitors, took a hit. “I went from doing $2,500 a day to $1,000. And I kept my staff,” said Haskell. Her fixed costs - payroll - didn’t change but the money she earned did. “I didn’t get a paycheck for those two years. I just made sure my vendors and my employees got paid and I just kind of sat tight.” Luckily, she had prepared for “what if.” “I had a rainy day fund for sure,” she said.

Feeling some amount of stress over cash flow issues, including paying vendors, employees, and loans, is common for many small business owners. But often cash flow problems can be mitigated with a little preparation and smart financial management. Here are 13 ways to keep track of the money you have coming in and going out to ensure you’re prepared for your business’s ebbs and flows.

Cash flow tips

1. Budget wisely.

“The secret to running a business is just don’t spend more than you take in,” said Haskell. A budget tracks when and how you earn or spend money. It ensures that you have enough funds to pay your expenses. First, there’s your revenue: How much money is coming into your business? Then your expenses: What are your fixed and flexible costs? Fixed costs don’t fluctuate, like rent or insurance, and flexible costs, like commissions, do. Your profit is the difference between your revenue and expenses. You want to continue to track revenue and expenses against your goals on a daily, weekly, and/or monthly basis. Download a sample budget spreadsheet

2. Build a cash reserve.

“I always thought, ‘What if I break my leg or my husband and I have a baby? What am I going to do if my espresso machine breaks?’ That’s 15 grand,” said Haskell. Those “what ifs” ensured she had cash reserved for the unexpected. Saving a portion of your sales prepares you for surprise expenses or investment opportunities.

3. Reduce costs where you can.

Look for ways you can reduce your production costs if you manufacture goods or save on business expenses. “It’s a balance of quality and affordability,” said Haskell, who tested other coffee brands and pastries before landing on ones she’d eat and drink herself. “You have to decide: what’s your vision statement? Do you want to do high volume and lots of sales, but it’s a cheaper product? I would rather sell fewer items and make sure I’m proud of what we sell,” she noted.

4. Lease vs. buy equipment.

Leasing equipment, like a $15,000 espresso machine, instead of investing in new upfront can help you keep more cash on hand until your business is better established.

5. Negotiate with suppliers.

You may be able to pay suppliers or vendors over time. Extending your payables to every 60 or 90 days may help give you the cushion you need to keep more cash in reserve and save along the way.

6. Invoice more often.

On the flip side, try to get paid sooner. There’s no rule that says you have to invoice every month. Request “due upon receipt” instead.

7. Automate your payables and receivables.

Digitizing your payments and invoices can be a more convenient, secure and faster way to pay and receive cash to your account. Submit online invoices for easier and faster payments and auto-pay bills on the last day that they’re due. Digital payment services may also help you keep better track of expenses and your account balances.

8. Incentivize business customers. 

Some business owners charge late fees for unpaid invoices but that could still leave you short on cash (and affect your business relationships). Instead, take a positive spin on receivables and consider offering a discount to customers who pay early.

9. Use a business credit card.

You can keep track of expenses more easily and take advantage of rewards programs like cash back to offset some expenses.

10. Apply for a loan when times are good.

Don’t wait until it’s too late to get a small business loan; instead, business is good, think ahead. You could qualify for lower interest rates and be in better standing with your bank. A line of credit may also give you more flexibility than a traditional loan to help you pay employees, purchase supplies and fund your operations. Shop around for the right loan for you.

11. Project your future cash flow.

Inventory, payroll, operational expenses, it all adds up. Project one to two years ahead to get a better sense of how your cash flow will affect your financial health down the road. Check out Visa's Cash Flow Tool to see your future forecast, detect anomalies, and be alerted to unexpected bills, late payments, and more.

12. Plan for emergencies.

Keep your business running in case an unexpected disaster strikes by having a plan. Train your employees for the possibility of an emergency - such as a weather emergency or technical one - to ensure you have a backup plan.

13. Reach out to investors.

Investors can provide cash or loans to help prevent cash flow issues. They can also support you with knowledge, experience, and relationships that can help you grow. Research groups and network with professionals in your area.


Learn more small business tips from Visa’s Practical Business Skills.

Tag: Financial Literacy

The Visa Blog Newsletter

Sign up for the latest news and views from Visa