Best Ways of Monitoring Your Small Business Cash Flow

If you own a small business, it’s essential to know the exact details of your cash flow. By staying on top of every facet of your business and closely monitoring financial transactions, you’ll reduce debt, increase profits, and prevent losses that can cripple any business endeavor.

hard-cash-grey-idolSo how does a successful business owner monitor all facets of their company’s cash flow? Consider the following tips to make the process more efficient and have better visibility and control over your financial resources and expenditures.

Determine Your Cash Flow

The first step toward monitoring your cash flow is determining the actual amounts, both inbound (received) and outbound (spent), along with the cash sources and how it’s spent. To accurately calculate these figures, you’ll need to have a formula. You can choose from the following options to get a figure that helps you track your money. 

  • Operating cash flow
  • Free cash flow
  • Cash flow forecast

Each of these figures is easy to calculate with a simple formula. You’ll use each based on the area you want to monitor. Keep close track of those figures monthly and quarterly to avoid gaps and losses. 

Use Apps 

Tons of apps are currently available that allow small business owners to see where their cash is going and whether it’s being used effectively. Depending on the market you operate in and the products or services you sell, consider using one or more of the following. 

  • Quickbooks
  • DryRun
  • Pulse
  • Float

These apps provide cash flow tracking, forecasts, accounting, and much more to provide a real-time picture of where your money goes and the amounts that come in and go out of your business. Find the product that suits your business and your style, and integrate it into your routine to stay on top of financial activity so you can take action when necessary. 

Use Invoice Factoring

An invoice factoring company allows a small business to sell its current list of unpaid invoices for cash. The factoring company purchases the invoices at a discount and pursues the funds from slow-paying customers. In return, your small business gets money immediately without having to wait and spend time and resources attempting to collect. The factoring company gets the full value of the invoice, thus making a profit.

This strategy is also beneficial to you because you can offer your customers better and more flexible terms on purchases without worry. It’s a tool that can help recover money that would otherwise take a long time to recoup.

Track Inventory

Another way to monitor your small business cash flow is to track your inventory and match your inventory to sales. You’ll be able to see which items are most popular and sell quickly. Knowing this information allows you to adjust your purchases and expenditures to avoid buying or producing items that don’t sell well and create losses.

You can also tweak slow-selling items and potentially improve marketing and advertising so they perform better. To accomplish this, you can incorporate hand-held inventory calculators connected to software that allows you to monitor your sales and purchases. Small businesses can also work with a Customer Relationship Management platform or CRM and get multiple features that make the process easy to view and adjust.

Use Accounting Software

If you’re a sole proprietor with just a few employees or occasional independent contractors, you can take advantage of affordable accounting software. All businesses must stay on top of their cash flow to be successful, and no matter how small your business might be, accounting software helps. This type of software allows you to track income and expenses and link to other payment processing platforms to get real-time figures and more. There are many options to choose from. Here are a few of the most popular.

  • Wave
  • Quickbooks Online
  • Fresh Books
  • Zero

Some of these programs offer free or low-cost plans for new or very small companies plus more extensive plans for businesses that need more options. It’s a great way to keep track of day-to-day cash flow. Plus, you’ll have all the details you need to file your quarterly and yearly tax forms without errors. Accounting software can even allow you to eliminate the cost of hiring an accountant to track your cash flow and file your taxes.


When you own a small business, staying on top of your cash flow and knowing where you’re spending your money can mean the difference between success and failure. Besides knowing where your cash is going, you’ll also want to know what products and services sell best and focus your buying power on those items. That means keeping accurate track of statistics related to buying and selling your inventory.

Don’t forget to harness the power of today’s newest apps that allow you to monitor daily financial figures and business processes from your mobile device, so you know what’s going on at any time of the day. Invoice factoring is another useful tool along with using accounting software.

Remember that today’s business climate requires the average small business owner to adapt to market fluctuations and changes. Up to 80% of small businesses fail because of a lack of financial monitoring. Using the latest technology and tools to keep a close eye on cash flow is the best way to ensure your company survives.

Grey Idol

Grey Idol

Grey is the Director of Marketing for altLINE by The Southern Bank. With 10 years of experience in digital marketing, content creation, and small business operations, he helps businesses find the information they need to make informed decisions about invoice factoring and alternative financing.

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