Finance Your Business
Tools to manage your business cash flow
Analyze your cash chokepoints, then find a solution that fits
One of the best ways to avoid being squeezed for cash is to hold on to your money longer before paying and collect money more quickly when you bill. You can tap a variety of financial tools and services that help with this—but to pick the most appropriate ones for your business, start by diagnosing potential gaps in cash flow, advises Chase Senior Vice President Don Maloney.
"You need to understand what your monthly cash inflows and outflows look like, and create projections so you see where the gap is," Maloney says. When you have a projection in hand, review the following tools to see which options will be most effective at improving your cash position.
Online bill payment
Schedule payments to get to your vendors right when they are due, rather than early. You'll hold on to your cash for as long as possible, but you won't go past due and damage the vendor relationship or your credit score. You can use credit cards or use Chase's automated clearing house (ACH) payments service; just check with your banker to find out exactly how much time it will take for funds to show up in your vendors' accounts. Then time your payments accordingly.
Use the float on your credit cards
Making payments using a business credit card lets you take advantage of the "float" period. With this approach, your vendors get paid promptly, but the funds aren't disbursed from your account until your card bill is due. Ask your vendors if paying by card is an option, or seek out new vendors that accept credit cards. You may also earn cash rebates or rewards that can fund extras for your business.
Scanning the checks you receive from customers—or taking a picture of them with your smartphone—is a faster way to deposit incoming funds than making a trip to the bank or ATM. A service like Chase QuickDepositSM can help organize your bookkeeping because remote deposit tools capture data associated with each payment, such as transaction history and check images, which you can easily reference.
Automatic ACH collection
Look into collecting payments via automatic ACH, especially if you have a service business where your customers make regular payments (this tool can help you estimate what you might save by switching to a more efficient payment method). Suggest this to existing customers, and make it a point to offer ACH collections to new customers when they sign up for your services. This will help you get paid on time.
Line of credit
Having access to a line of credit gives you the flexibility to tap extra funds as needed to smooth out cash flow—or take advantage of an unexpected opportunity. "You can look at this as an insurance policy on your cash flow," Maloney says. Having a good handle on your inflows and outflows will help you scope out how large a line of credit you may want to arrange for.
A merchant services account enables you to accept debit or credit cards in person, by phone or online, making it easy for customers to pay promptly. Ask your bank when funds from credit card payments will become available to you—many banking services offer next-day funding. While most consumer-facing companies accept cards, if you serve business customers, you may find that they also want to pay with credit cards. In exchange for the convenience of paying this way, your customers may be willing to accept shorter payment terms—for example, you might be able to shorten a 30-day billing cycle to 15 days for card-paying customers.
Getting daily summary updates and real-time notifications such as Chase Account Alerts can help you stay on top of cash inflows and outflows. You can see, for example, when a customer has paid a bill, when checks have been posted, and when your account balance reaches a certain threshold, among other things. Keeping an eye on account activity can tip you off when expected payments don't arrive on time so you can take quick action.
No matter what type of business you run, at least a few of these tools are likely to help smooth out cash flow. Assess your base of customers and current payments/bill-pay setup to see which services might work best for you.
Laura Schreier is a Chase contributor who focuses on business issues, particularly banking and finance. She has contributed to CNBC.com, Banker & Tradesman, the Hartford Business Journal, and others.