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Running a business isn’t easy, and managing your cash flow requires careful planning. 

To ensure that your business remains strong and profitable, you need to understand how to put the right strategies in place. 

Here are some time-tested strategies on how business owners can effectively manage their cash flow: 

Track Your Finances

The first step to managing your cash flow is understanding where your money is going and coming from. That means tracking all of your income and expenses on a monthly basis, whether it’s through an accounting system or good old-fashioned spreadsheets. This will give you a clear picture of how much money you have at any given time.

Create a Cash Flow Forecast

Once you have tracked your finances, you can use this information to create a cash flow forecast—an estimate of how much money will be coming into and out of your business in the near future. Having an accurate cash flow forecast will make it easier for you to plan ahead and prepare for any potential cash flow issues.

Maintain a Cash Reserve 

Having a cash reserve is essential for managing your business’s day-to-day operations, as it ensures that you have enough money to cover any unexpected costs or gaps in income. Aim to maintain at least three months of expenses in your emergency fund—this will give you confidence knowing that you are always prepared for the unexpected.

Negotiate Payment Terms 

The timing of payments can have a significant impact on your cash flow, making it crucial to maintain flexibility when negotiating payment terms with your customers and vendors. By offering early payment discounts or longer payment terms, you can establish more favorable terms that not only benefit your partners but also help you effectively manage your cash flow and stay on top of your finances. This strategic approach allows you to strike a balance between meeting your financial obligations and fostering strong relationships with your business associates.

Improve Your Collections Process 

The longer you wait for payments from customers, the more strain it puts on your business’s financial health and operational capabilities. To enhance your collections process and ensure prompt payment, consider leveraging automated billing systems or providing convenient digital payment solutions. These strategies not only streamline the payment process but also offer added convenience and flexibility to your customers, improving overall customer satisfaction and facilitating faster transactions. 

Remember that managing cash flow is an ongoing process. To ensure the success of your business, you should regularly review your finances and revisit these strategies as needed. Also, it’s always a good idea to talk to a financial advisor if you need help in understanding or planning for your business’s financial health. 

Work with us

At Independent Financial Services we have professionals that can guide investment strategies, tax-efficient savings options, and retirement and succession planning. 

Contact us today and be confident that your business is secure now and into the future!

Material provided by Redfern Media, an independent third party. Raymond James is not affiliated with and does not endorse the opinions or services of Redfern Media.