How to manage cash flow for your small business

Payments in. Payments out. Cash flow is the life blood of any business. What is cash flow? It’s the thermometer you use to check on the health of your operation, letting you know what funds you have on-hand to pay for daily operational expenses and surprise costs. In times of uncertainty, carefully manage available funds is critical – ensuring that small businesses have enough cash on hand to pay for surprise expenses, stock up on inventory, hire new staff, and much more.

Predicting the future is impossible – but with the right tools and strategies, your business can confidently make financial decisions based on solid forecasting* and dependable service providers. Even profitable business can struggle to keep cash on-hand if they do not carefully manage their money – slow invoice repayment, inventory bottlenecks and administrative expenses can pile up quickly. In fact, research shows* that 90% of small business revenue is spent on operational costs, leaving only a narrow margin of funds to reinvest in the growth.

How to calculate cash flow

There are several different formulas used to calculate cash flow.* The most common for small businesses are Operating Cash Flow and Free Cash Flow.

• Operating Cash Flow (OCF) is a measure of the amount of cash generated by a company's normal business operations. OCF indicates if a company can generate enough positive cash flow to maintain and grow its operations, otherwise, it may require external financing for capital expansion.
• Free Cash Flow (FCF) is the cash a company generates after taking into consideration cash outflows that support its operations and maintain its capital assets. FCF is the cash left after a company pays for its operating expenses and capital expenditures.

Staying positive is not just a state of mind

Keeping your business cash positive is the goal. What is positive cash flow? If you’re bringing in more money than you’re paying out, then you’re generally in pretty good shape. That’s why it is important to carefully track your monthly expenses and make plans to adapt to likely challenges. Just like in personal finances, a business should always have reserve funds to cover slow periods or unexpected expenses. Your payments processor can also help you find opportunities to reduce your acceptance costs with tools like commercial card optimization and credit card surcharging.

Cash flow management solutions

Luckily, there are options out there that empower small business owners to take more control of how much cash they have on hand and when they have it. We offer a variety of funding solutions that can take the headache out of cash flow issues, depending on your needs and eligibility (which may vary based on your industry, your debit card issuer’s limits, and other factors):

• Next Day Funding: No matter the amount your company needs, you can access your business’ funds the next business day. Simply set up your credit card payments batch to settle by 10 p.m. ET, Monday through Friday, and your funds will directly transfer to your account via ACH first thing the next business day.
• Fast Track Funding: With Fast Track Funding we put your funds into a specialized fast lane that speeds up the normal funding process. You can submit a payment batch each day before 6 a.m. ET with transactions totaling up to $100,000. This means that you can submit your batch late Monday night after your business closes, and your funds will be deposited into your account by 5pm local time on Tuesday.
• True Daily Funding: True Daily Funding is a cash flow management solution that allows you to unlock the potential of same-day cash flow. Powered by Real-Time Payments (RTP) network, this tool enables your business to be funded quickly with up to $1,000,000, with minimal delay. Perfect for businesses that can’t wait until the next day, you get funded within hours of a batch submission – seven days a week, including weekends and holidays.
• On Demand Funding: On Demand Funding is a next generation cash flow management tool that allows you to transfer money from transactions in your open batch directly to a linked debit card in as little as 30 minutes. You can immediately access the funds to make purchases or pay bills with up to $50,000 per day in transfers, even on weekends and holidays. It is not a loan with ongoing interest, just a one-time fee of 1.5% of the amount of money you settle through On Demand Funding.
• Standard ACH: Available on all business accounts, Automatic Clearing House (ACH) is the standard speed of funding. ACH solutions allow you to improve cash flow forecasting, increase accuracy through electronic payments and access funds with greater speed and visibility. ACH funds are made available within one to two business days of a batch being submitted.

Small business owners have to tackle countless challenges every day – but you don’t have to figure them out alone. Investing in the right tools and mastering cash flow best practices can help you position your business for growth.