Business Management / Finance

6 tips for struggling with small business cash flow

Eric Goldschein

Updated: Feb 12, 2020 · 7 min read

Toolkit for download in this article

business cash flow problems

Running a successful business is about much more than making money.

Not only do you need to account for your various expenses—overhead costs, payroll, the occasional investment in new technology or equipment—but you’ll have to balance your cash in and cash out so you always come out ahead.

This balance of cash in and cash out is called cash flow. And if you find that you’re struggling with keeping your cash flow positive over a given month (even if business is booming) then you’re experiencing one of the more common business cash flow problems—one that actually sinks many businesses if they’re not careful.

Cash flow problems arise when businesses struggle with the timing of their expenses relative to their revenue. If you run out of cash early in the month when all your expenses hit, what happens if an emergency arises, or an opportunity for a discount deal on inventory appears? Your lack of liquidity and flexibility can be an opportunity killer—not to mention it can prevent you from covering your core expenses.

The occasional cash flow issue hits every business. But if you find that every month you’re coming up against the same problem, it’s time to rethink how you handle cash flow. These six tips should help you right the financial ship:

Start forecasting your inflows and outflows

The first step is to get a better handle on when your cash is entering and leaving your business bank account. If you’ve been flying blind and paying bills or invoices as they come, you won’t have a sense of what’s causing your cash flow snags.

A cash flow forecast or projection is an estimate of the money you expect to flow in and out of your business, and when. You’ll include your fixed monthly costs (such as rent and utilities, and your repayment schedule for a business loan), as well as expected expenses like replacing an aging printer or POS system. You’ll also include your expected revenue for the same timeframe.

To forecast your cash flow, consider investing in accounting software that can help you stay on top of your finances such as QuickBooks (more on that below), or use a dedicated forecast tool like Float.

Obtain a business line of credit

If you’re having trouble staying cash flow positive, you might think the last thing you want to do is go into debt. And that’s true, which is why getting a business term loan isn’t a recommended solution here.

On the other hand, a business line of credit—a flexible form of financing similar to a credit card, where a lender grants you access to a pool of funds you can draw from anytime—is particularly helpful in a cash flow crunch.

Why? If you qualify for an LOC, you can keep it, unused, in your back pocket until an emergency calls for it. A small draw on your line—even if it means paying back what you drew plus interest—may be better than failing to make payroll, or being unable to take advantage of a great deal on materials.

Apply for a line of credit, and keep it in case of emergencies. There may not be a better form of financing out there for businesses that walk a fine cash flow line.

Use better tools and practices to get paid faster

Many small business owners come upon the discouraging realization that some clients will do anything they can not to pay their invoices on time. Perhaps those clients are also trying to even out their cash flow; maybe they have other issues. In any case, you may often find yourself trying to make up for lost revenue while you wait to get paid each month.

One tactic that may help: Investing in invoicing tools that can help you get paid promptly. Invoice software like Due can bill clients immediately upon completion of a job, send follow-up payment reminders, and allow for one-click payment options.

You can also try tightening your payment guidelines, instituting late payment fees for customers who try to hold off on paying you—or, conversely, offer a small early payment discount to customers to send payment right away.

Try financing your invoices or inventory

Another responsible business financing option is to use outstanding invoice or incoming inventory to secure funding, without putting other aspects of your business at risk.

Invoice financing is when you finance unpaid invoices, receiving a majority of what you’re owed from a lender upfront, then receiving the rest (minus fees and interest) when your client pays off the balance. You can also use “invoice factoring,” which is when you sell the invoice to a lender and let them worry about collections—a good option when you’re ready to cut ties with a customer, or otherwise don’t mind if another party follows up with them about payment. The invoice itself acts as collateral in this situation.

Inventory financing is based on a similar concept. You’ll get enough money from a lender to cover the costs of a new batch of inventory, then pay off the lender when your revenue comes in. The inventory acts as the collateral here, so if for any reason you default, the lender can seize that inventory as repayment.

In both of these situations, your business will sacrifice some profit for the peace of mind that comes with a stable and consistent cash flow.

Negotiate with your vendors

On one hand, you know what it’s like when clients fail to pay your invoices promptly. Conversely, your cash flow is suffering because you need to pay your own vendors on a tight schedule.

If in your forecasts you notice that payments to vendors are what’s stretching your cash flow to the breaking point, start reaching out to your suppliers and vendors to see if there’s any wiggle room with your own payment period. If you have good, long-standing relationships with your vendors, they may agree to extend your invoice due dates by an extra 15-30 days.

While this might not work for every vendor, even a little wiggle room can make a difference for a small business.

Invest in an accountant—or elite accounting software

This final point is more of an overarching bit of advice that most of the other points have touched on. If you are a small business owner trying to bootstrap your way to success (mostly by wearing many hats, including that of accountant) and refuse to pay for an accountant’s services or for good accounting software, you’re doing yourself more harm than good.

Accountants don’t just tally up what you owe come tax season. A good business accountant can advise you on your business structure, help you write (or re-write) your business plan, make sense of key financial metrics, and of course, help you balance your cash flow. A study by Intuit found that “89% of small businesses say that they are more successful with an accountant or advisor.”

If you don’t have the money to pay for an accountant, even on an ad-hoc basis, accounting software is also a good investment. The money that you’ll spend on this software will deliver fantastic ROI, particularly by automatically handling bill payments, forecasting, and other tasks that will keep you cash flow positive—and warn you if you’re close to going into the red.


You likely didn’t get into your business so you could bookkeep and balance the checkbook. Cash flow management isn’t a fun part of business for many, but it is what keeps the lights on in the long term. Make cash flow struggles a thing of the past by taking the above tips into consideration, and you’ll be able to turn your focus back to what you love about running a business.

Eric Goldschein is an editor and writer at Fundera, a marketplace for small business financial solutions such as small business loans. He covers entrepreneurship, small business trends, finance and marketing.

Was this post helpful?
Illustration of Keap growth handbook
How can you grow your business to the next level? Take our assessment to find out.

The Small Business Growth Assessment will reveal where you are on your path to growth and help you identify common pitfalls so you can avoid them. Plus, you’ll get FREE curated resources to get you to the next stage.

Take the assessment

You may also like

{{ deSlug(record.displayCategory || record.secondaryCategory || record.primaryCategory || '') }} | min read

Knowledge is power, get some more...

Hello, have a question? Let's chat.

Got it