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The cash flow playbook: Strategies for preserving money

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Cash flow management is vital for the success and sustainability of any business. Cash flow issues can hinder growth and even lead to the downfall of otherwise promising companies. Preserving cash flow requires careful planning, strategic decision-making, and proactive measures. In this article, we will explore six effective strategies to help you preserve cash flow and navigate challenging economic conditions.

  1. Monitor and forecast cash flow

The first step in preserving cashflow is to have a clear understanding of your current financial situation and projected cashflow. Implement robust accounting practices and regularly monitor your cash inflows and outflows. Prepare cash flow forecasts based on your historical data, sales projections, anticipated recurring customer billings and anticipated resource needs. Go out at least 12 months into the future so that you are considering seasonal fluctuations. Forecasts enable you to identify potential shortfalls or surpluses, allowing you to take proactive measures sooner. Pro Tip: Consider scenario planning so that you can create good, better, best forecast versions depending on unknown factors that may be beyond your control (like future sales projections.)

  1. Streamline expenses

Carefully analyzing and streamlining expenses is also an important step in preserving cash. Begin by identifying non-essential costs so that you can then consider eliminating or reducing them wherever possible (and within the cash flow planning exercise flagged in 1.). This analysis could include renegotiating better deals with suppliers, exploring more cost-effective alternatives and optimizing inventory management to reduce carrying costs. Scrutinize regular expenses such as office supplies, travel expenses, expensive and antiquated phone systems and rarely used subscriptions. By reducing unnecessary expenses, businesses can significantly preserve cash flow without sacrificing productivity or quality.

  1. Negotiate payment terms

Another effective way to preserve cashflow is by negotiating favorable payment terms with both customers and suppliers. For customers, consider incentivizing early payments through discounts or offering flexible payment options. Don’t assume your clients have the same cash flow constraints that you do – be bold and ask anyway. On the supplier side, negotiate extended payment terms or request discounts for prompt payments. By managing payment terms strategically, businesses can improve their cash position by accelerating incoming cash and/or delaying outgoing payments.  

  1. Improve receivables processes

Focusing on optimizing your cash collection processes is another important step in maintaining a healthy cash flow. Invoice promptly and follow up diligently on overdue payments. Consider offering discounts for early payments or implementing incentives for customers who settle their accounts quickly. Streamline your billing procedures by using electronic payment methods or implementing an automated invoicing system. Establishing clear credit policies or conducting credit checks on new customers are a couple more helpful tools to consider. By actively managing receivables, businesses can reduce the risk of cash flow interruptions caused by late or unpaid invoices.

  1. Leverage technology and automation

Incorporating technology and automation into your business processes can significantly streamline operations and preserve cash flow. Leveraging the Canadian Digital Adoption Program (CDAP) can even finance the associated one-time investment costs. For certain business processes, automation can enable a business to increase revenues while simultaneously reducing overhead costs creating a 2X positive impact on cash requirements. 

  1. Explore financing options

During challenging times or even periods of growth, businesses may require additional funds to preserve cash flow. If your business plans include buying expensive equipment, consider financing it. Assets that will have long term benefits can be financed so that they do not impact short term cash flow. Keep in mind that lending rates factor in credit scores, so explore financing proactively, not as a last measure.

Preserving cash flow is essential for the stability and success of any business. Remember, effective cashflow management requires ongoing attention and adaptation to changes in your business environment. With these strategies in mind and applied consistently, businesses can thrive even in challenging times.

If you don’t have the in-house team to realistically implement these measures, you may want to consider outsourcing your financial operations, which can both save costs and increase financial performance. Numbercrunch provides outsourced Financial Operations. Our team of bookkeepers and Controllers can track and manage your company transactions efficiently and issue monthly metrics reports to you each month so you can make data driven decisions to achieve your business goals and objectives.

Our comprehensive subscription model includes Payroll, Rev Ops, Cashflow projections, and all other financial and accounting support activities typically under the responsibility of the CFO. To enquire more about our FinOps subscription please email