Cash Flow Management Tips for Small Business Owners

cash flow managementAs a small business owner, you’re faced with many daily, weekly and lifelong challenges. One of the biggest challenges and most important is cash flow management. Mismanagement of cash flow creates cash flow gaps, which can literally put you out of business by missing a crucial bill like paying a supplier your business depends on.

A cash flow gap occurs when your expenses come due prior to revenues coming in. It’s not that you can’t afford your expenses, it’s just a timing difference – you don’t have the cash flow (yet) to pay the bills. For small business owners, cash flow gaps can occur from delayed payment terms, fluctuations in business, and an unexpected additional capital commitment to start a job.

Use the following tips to help avoid any pitfalls in your cash flow.


Cash Flow Management is a Frame of Mind.

Small business owners should operate in large, broad frame of mind that is always asking, “how does this affect my cash flow?”. Think about what the net benefits and costs are of each purchase you make or deal you book. Also try to think of the timing of it. Ask yourself if you have enough cash on hand or access to credit (i.e. like an American Express for business). If not, don’t book the order or agree to purchase anything, unless you have very favorable terms.

Map Out Your Dollar Life Cycle

To successfully manage cash flow you need to understand the road map of each and every dollar. Ask yourself this – if you take $1 right now, and deploy it into your revenue generating activities, how many rest stops will your dollar make? How many hands touch that dollar before it comes back into your bank account? How long will it take to get into your bank account? Understanding the flow and timing is crucial.

Be Conservative with Timing

You can be conservative with your cash flow management approach in 2 days, neither of which are mutually exclusive. First is to be conservative with the timing of revenues, and the second is to be conservative with the amount. Think you’re doing to get paid in 10 days? Call it 15. Issuing an invoice payable in 30 days? Bank on getting that money in 36 days. It’s important to add buffer zones to the timing of your income and expenses, to keep expectations in order. If you manage your expectations, you can manage your cash flow a lot easier. Also, you should underestimate sales. If you buy 5,000 units of a product and based on past data you expect to sell it over the course of 2 months, budget as if you’re selling it over 3 months. This way if things slow down, you don’t run out of money.

Build a Cash Reserve

Cash is king. It never, ever hurts to have additional cash on hand. Pay yourself $10-$20 per day, or something nominal. Make sure you can afford to set aside cash. Figure out what the number is, divide it by 21 (for each business day), and set aside that money into a separate reserve account. Having a cash reserve can be used as a way to bridge cash flow gaps if they occur.

Explore Invoice Factoring

Factoring your accounts receivable is a great cash flow management tool. Although it costs 1-2% per month, consider this a revenue share for outsourced cash flow management. With invoice factoring, you can pick and choose which receivables you want to sell on a daily, weekly or monthly basis and as you generate them, accelerate the cash from them. Let us know if you need help finding an accounts receivable factoring company, we’re happy to help.


How to Pick a Factoring Company That Best Fits Your Needs

how to pick an invoice factoring companyThere are many advantages of invoice factoring, but choosing a traditional or new-age factoring company can be difficult. Between long term contracts, vague terms, hidden fees and penalties, and minimum monthly funding amounts, a true factoring facility often leaves a lot to be desired. We hope you find this article helpful in choosing the right factoring company to best fit your needs. As always, don’t hesitate to reach out to us to review a factoring deal you have on the table. We’re happy to help!


Apply today or continue reading for more info!

Full Name*

Business Name*


Email Address*

Phone Number*

Monthly Receivables / Sales

Transparency in Rates and Fees

Many factoring companies, unfortunately, don’t make it easy to determine their total fees. Often times invoice factoring companies will have an underwriting fee, a discount fee, an early termination fee, and a misdirected payment fee. Here is a quick breakdown of what those are:

Underwriting Fee – this usually goes toward the actual expenses involved in underwriting your deal, like a background check and UCC filing / release. Careful this is not egregious. It’s very customary to be charged an underwriting fee and factoring companies have every right to do it, but it cannot be outrageous. It should be simply to cover costs. Request specifically: a break down of what it costs to do 1) background checks, 2) debtor underwriting and 3) UCC filings / releases. Ask that they don’t charge you anything more than cost.

Discount Fee – this is a one-time fee, usually as a % of total invoices purchased, charged in the first month. You can probably negotiate to have this waived.

Early Termination Fee – if you terminate the contract too early, you may be charged a flat rate fee of $5000-$10,000. This would be above and beyond the buyout (the buyout is the total amount of your invoices that are now owed to the factoring company). Request specifically: a waiver of early termination fees if you are terminating the factoring relationship in exchange for a bank line of credit (or some other type of financing from an FDIC insured institution). If a factoring company pushes back on this request, they’re simply in it for themselves and don’t care about your long-term prosperity.

Misdirected Payment Fee – if your customers improperly pay you (on purpose or accident), then you will be charged a percentage of the invoice value that was inadvertently paid to you. The reason being is that the factoring company cannot prove whether or not the misdirected payment was done at your direction. Therefore, to avoid this fee, receive written assurance (via a UCC notification/acknowledgment letter provided to you by the factor) that payment will be directed to the factor.

Also ask your factor if they pro-rate the factoring fees in the first month of funding, or if they charge you a full month’s worth. For example, if your quoted factoring fee is 2%, it will be pro-rated on a daily basis. Meaning if you get funded mid-month, you will be charged 1% (for half a month). However, some factors charge the full 2% in the first month of funding, regardless of when the funds hit. This is pretty standard, however it should be conspicuously disclosed in the term sheet or the factoring company should call it to your attention.


Look for Flexible Terms

Let’s be realistic, factoring your invoices is a lot like staying in a hotel. You don’t do it all year around, only when you travel (or need to). Therefore, you should look for a term that is 6-12 months, or spot factoring (spot factoring is a one-off sales of your individual receivables, at your choosing). The problem with a long-term relationship is that factoring might not make sense for you in 8 months, for example. Your business could be cash-flow sufficient, so why factor your invoices? If you get yourself into a long-term contract, it’s important to have a scapegoat, so try to negotiate your way out of any early termination fees.


Choosing The Right Factoring Company

The most important thing is transparency. Factoring companies, much like you, are in the business of making money. So finding a deal with no fees is quite hard. But if the factoring company is honest, open and transparent from the outset about what they will charge you, then that is the most important. What you don’t want are hidden fees and surprises, so be sure to ask the right questions and understand the deal from the very beginning. Lastly, you want to enjoy who you’re working with. If they offer you a good deal but the factor gives you bad vibes (for whatever reason), move on. Go with your gut, make sure you like who you are working with – a factoring company should be viewed as a partner.

As mentioned, we are always here to help you review a deal or find you a better offer. Contact us any time to help you pick the right factoring partner.


We’ll help you find the best factoring company. Apply today!

Full Name*

Business Name*


Email Address*

Phone Number*

Monthly Receivables / Sales

12 Things You Can Do in 24 Hours (Getting Funded Is One)

It often seems like there aren’t enough hours in the day, but 24 hours is a LONG time. What can you do in 24 hours? Well, we scoured the internet for some ideas, compiled a list, and here’s what we came up with.

24 Hours: Ready, Aim, Fire

12. Walk Around Manhattan

11. Read one of Shakespeare’s plays

10. Parachute out of a plane 639 times

9. Make 7,539 pizzas.

8. Play 1,440 holes of mini-golf

7. Do 5,045 chin-ups (if that’s even possible?)

6. Bike from Miami to Key West

5. Listen to the 300 greatest songs of all time list

4. Climb from the lowest to the highest place in America

3. Watch 5 of the AFI’s greatest films of all time

2. Watch 2 whole seasons of House of Cards

1. Get funded with an invoice factoring facility or cash flow loan.

You could have been funded by now, so what are you waiting for?

Author disclaimer: if you do any of the above, make sure you get lots of sleep and drink plenty of fluids.