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How to improve your business cash flow

Learn cash flow basics for running your business more strategically. Presented by Chase for Business.

minute read


    Not every business owner loves to crunch numbers. But business cash flow figures are worth watching closely, especially when your business is young and growing. In fact, a business with good sales and strong profits can still struggle if it doesn’t pay attention to inflows (cash added to its accounts) and outflows (cash that leaves its accounts). That’s why cash flow is so important to small businesses.

    The good news is that any business owner can learn about cash flow and how to use those numbers to guide decisions about operations, investments and more. Let’s start with the basics.


    What is business cash flow?

    Business cash flow is generally thought of as the net balance of cash in your accounts over time. If your small business has $5,000 in cash on Monday and $4,000 in cash on Tuesday, it has a negative cash flow between those two days. But if on Wednesday your business has $6,000 in cash, your cash flow from Monday to Wednesday is positive. Businesses typically analyze their cash flow by weeks or months, depending on the rhythms of sales and expenses.

    However, small business cash flow is about more than money in the bank. Think of it as a temperature check on the health of your business. At a typical business, cash flow fluctuates often. Understanding what drives the peaks and valleys of your cash flow is what’s important, because these factors can help you take action to stabilize your cash flow and plan for known risks.

    To accurately calculate cash flow, you have to think ahead to both what should go right and what might go wrong. Cash buffer days offer one tool to help you imagine the realities ahead — especially when a crisis hits.


    Cash buffer days

    One useful way to think about cash flow is to periodically calculate your cash buffer days. Cash buffer days are the number of days your business can cover its expenses without inflows. A simple way to estimate cash buffer days is by dividing your average daily cash balance by your average daily cash outflows.

    For example, if your business has $5,000 in cash on average, and pays out an average of $500 per day for expenses, you can estimate 10 cash buffer days ($5,000/$500=10). A more sophisticated approach can consider the urgency of your expenses. For example, if you typically pay an invoice within 20 days, but the vendor requires invoices to be paid within 30 days, you have 10 more days to make that payment, which can increase your cash buffer days. Your business may also have expenses — such as manufacturing supplies, temporary employees, marketing activities or subscription services — that can be paused if you’re suddenly unable to do business. Reducing these expenses can increase the number of cash buffer days.

    Knowing your cash buffer days and monitoring this number regularly can help you prepare for a sudden change to your business. This practice also invites you to regularly take a closer look at your revenue and expenses, especially if you have just a few or a decreasing number of cash buffer days.


    Maximizing cash in

    It’s smart business to focus on revenue, but many entrepreneurs are better at making the sale than collecting the money. An efficient receivables process that makes sure invoices go out quickly, payments come in on time and cash reaches your bank account can help your business create cash flow.

    Beyond operational efficiency, revenue urgency driven by cash flow concerns can also push you and your team to be more creative.

    • Are your prices set at the right levels?
    • Could you bundle or offer bulk discounts that increase your sales and overall revenue?
    • Is there a customer segment that you can reach by making small changes to your products, services or marketing?
    • Can you increase revenue by developing a new product or service?

    As you think about revenue opportunities and cash flow, remember to take expenses into consideration. New revenue that requires a lot of upfront investment could strain your cash flow even more.

    For more about how to increase cash coming into your accounts, check out "Increase Cash In."


    Minimizing cash out

    Expenses are often what tip a cash flow position from stable to wobbly. The old saying “It takes money to make money” is true, but spending too much too soon can lead to disaster. Here are some ways to reduce expenses that many businesses consider when cash flow gets tight:

    • Reprioritize payments. If you know you’ll have cash coming in soon, you can wait to pay some bills on their due date or renegotiate the terms with vendors to help you weather a difficult time. An efficient accounts payable process can help you identify payments to prioritize and make it easier to time your payments to due dates or to match expected cash inflows.
    • Reconsider investments. Investments in your company are often a smart move during good times, but if cash is tight, you may need to delay renting that new space or rethink the purchase of new equipment.
    • Reduce personnel expenses. Salaries are typically a big expense, and many businesses cut hours or positions when faced with an extended cash flow problem. However, if your business is heavily dependent on customer service, you might look to make cuts elsewhere first — especially in a tight labor market.
    • Rebalance inventory. Too much inventory can also endanger your cash flow — particularly if you have to pay for products or supplies upfront — but it’s a lack of inventory that can cost you sales and limit your revenue.

    For more about how to slow the rate of cash coming out of your accounts, check out "Decrease Cash Out."


    Visualize your cash flow

    Sometimes it’s easier to understand your business’s cash flow in a chart or graph. Chase offers a no cost digital tool to help you see cash inflows and outflows over the course of a year and analyze how your business manages cash. Map out your current performance, or run different scenarios to help you plan for what’s ahead. It only takes a few minutes to get started when you visit


    For informational/educational purposes only: The views expressed in this article may differ from those of other employees and departments of JPMorgan Chase & Co. Views and strategies described may not be appropriate for everyone and are not intended as specific advice/recommendation for any individual. Information has been obtained from sources believed to be reliable, but JPMorgan Chase & Co. or its affiliates and/or subsidiaries do not warrant its completeness or accuracy. You should carefully consider your needs and objectives before making any decisions and consult the appropriate professional(s). Outlooks and past performance are not guarantees of future results.

    JPMorgan Chase Bank, N.A. Member FDIC. ©2023 JPMorgan Chase & Co.