Quick Tips for Small Business Cash Flow Management

By Michael Branham

For a small business owner, wearing the CFO “hat” may not be that exciting, but it’s often a necessity. While your core skill set and business focus might not include managing cash flow, it’s a chore that somebody has to accept for your business to operate successfully.

The Planning Center provides extensive planning with clients on personal cash flow management, and many of the same tips can apply to small business owners throughout the growth trajectory of their venture. The strategies are simple—in some cases obvious—and yet we are often surprised at how effective the conversations can be.

Here are some quick tips on how to set up an effective small business cash flow management system:

  • Choose the appropriate tools: Invest in a bona fide accounting system from the beginning. Developing your own Excel spreadsheet for budgeting and cash flow management may seem like the best (read: cheapest) option, but as your business grows you’ll want the expanded capability that a commercial application provides. Reporting, invoicing, and planning are all aided by available software programs. Quickbooks is a recognizable name in this space, but there are other options as well. A quick internet search and a little due diligence can yield alternatives.
  • Develop consistent policies: This can be a critically important step in simplifying your cash flow approach. Defined policies ensure good management habits are formed and can save valuable time instead of analyzing each situation separately. Specifically, policies can be incredibly valuable when revenue isn’t received regularly and evenly. For example, a real estate agent who is paid as transactions close should develop policies that immediately parse out the estimated amount for taxes, a retirement plan contribution, money that can be reinvested in the business, and the money needed for personal compensation. If you know how every dollar needs to be divided (because you’ve done the planning already), you can eliminate surprises and ensure all facets of your business are covered. Your policies can then be reviewed periodically and altered as your business changes or grows.
  • Create the appropriate “buckets”: Once you’ve done the planning, typically on an annual basis with quarterly reviews, it’s often helpful to create “buckets” for each of the aspects of your cash flow plan. Have an account that receives money set aside for taxes and a separate account for dollars dedicated to marketing, insurance, or personal development. It may seem cumbersome when you initially open these accounts, but having dedicated funds to each of your business needs makes the eventual expenditures easier and less stressful.
  • Have appropriate reserves: One of the first policies you’ll develop is the amount of cash you’ll want in reserve and how to fund that reserve in short order. Particularly for businesses with variable revenue, having cash on hand to cover you in tight months or to allow for investment into unexpected opportunities (an opportunity fund) is critical.
  • Automate: With policies developed and buckets in place, automate your approach as much as possible. The less you have to do manually the more time you’ll be able to allocate to actually doing business.
  • As you grow—outsource: The reality is you probably didn’t start your business to manage cash flow. Your skills and passion lie elsewhere. As you start out in business it’s important to be versatile, cost conscious, and to wear many hats. But as your business grows and you spend more of your time on business development and customer service, you’ll find yourself with less time to work on the business. Look for ways to offload some of the extra work, including your CFO functions. Does your CPA firm offer this service? Can you take advantage of the ever expanding menu of virtual CFO options? Whatever your solution, you won’t need to undo the work in place, you just won’t have to spend as much time on the execution.


Running your business doesn’t have to be a complicated affair. In fact, we find most clients benefit by focusing the majority of their time and effort on their core service offering, not playing the role of business owner. Simplifying your approach, and developing a set of defined policies and procedures, can allow you to ease those CFO burdens.

Michael Branham, CFP®, Sr. Financial Planner

Michael Branham, CFP® is a Senior Financial Planner with The Planning Center, Inc. in Anchorage and the Twin Cities, Minnesota. Branham provides comprehensive planning services for young professionals and clients in transition and does extensive work with retiring clients on retirement income solutions.  Contact him at mike@theplanningcenter.com or by calling 907-276-1400.

This article first appeared in the August 2016 print edition of Alaska Business Monthly.