Businesses of all sizes deal with cash flow challenges and a lack of working capital at one time or another. It’s a constant balancing act and something as small as a delayed invoice — or as large as a global pandemic — can wreak havoc if you’re not prepared.

Understanding Your Cash Flow Cycle

To put it simply, cash flow is the cycle of revenue coming in and expenses going out. Often the timing isn’t quite as smooth or consistent as you would hope as a business owner, so tracking your funds across all channels is key to understanding what gaps might need to be addressed with solutions like credit cards, lines of credit, or vehicle and equipment loans.

Depending upon the complexity of your accounts, investments, expenses, and income streams, you may be able to get a good idea of your standard cash flow cycle with something as simple as online banking and budgeting tools. If your situation is more complicated, you may also want to consult with a trusted business banking expert to sit down and go through everything together. Streamlining a consolidated view of your finances in one place can help you start from square one and assess where things stand before you plan for what’s next.

Common Cash Flow Challenges

Business owners in the Greater Philadelphia area and across the country have faced a series of unexpected challenges over the past few years due to the pandemic and an ever-changing economy. For family doctors and other healthcare practices, common cash flow challenges may look like start-up costs, delays in insurance claims, or delinquent account collections. For other types of businesses, the exact challenges may differ, but many of the same strategies and solutions can help. In this video, hear about some of the most common challenges and a few key tactics and strategies business owners can use to control operating costs, connect with others in the community, and help their organizations thrive regardless of economic conditions.

How to Effectively Manage Cash Flow

It’s crucial to control operating costs and prevent small expenses from ballooning out of control over time. Once you’ve gained an understanding of where you stand, incorporate these solutions into your plan to help get your business back on track and ahead of anything else that may come your way.

• Negotiate Costs and Terms: You can often reduce costs, extend deadlines on invoices due to vendors, and receive payments due from customers sooner — simply by asking and negotiating upfront. By establishing and maintaining trusted relationships over time, they’ll be more likely to work with you on arrangements that may better serve your budget.
• Secure Financing and Working Capital: Compare banks and credit unions to find the best rates and lowest fees on lines of credit, credit cards, commercial mortgages, and other business loans that may help fill the gaps and get you to the next level. If your current funding is costing you too much on high rates and inflexible terms, you may be able to refinance or transfer existing balances at a lower rate to pay them back sooner and keep more cash liquid as you go.
• Assess Your Cash Management Solutions: Even though certain backend processes are necessary, every business owner knows how time-consuming they can be. Using digital tools and technology can greatly reduce manual errors and increase profit margins. Plus, ensuring you aren’t bleeding money on overpriced systems with hidden fees and hefty operating costs can go a long way. Assess how you can take advantage of time- and cost-saving cash management solutions like merchant services and payment processing, remote deposit capture, payroll automation, and HR administration from a trusted vendor.
• Plan Ahead for the Long Term: When you establish a relationship with a business banker who’s guided clients through the ups and downs of inflation and a fragile economy, you can talk through personalized strategies and anticipate industry challenges your business may face over time. That way, you can design a custom plan together and feel confident addressing whatever comes next.

Choosing a banking partner is a big decision, one you would make as carefully as an accountant, lawyer, and your staff. You want someone you can trust, who prioritizes the best interests of your business. Someone both well-informed and accessible that knows you as a business owner and cares about your success.

Citadel Credit Union’s Business Banking Team combines years of banking expertise, business ownership experience, and entrepreneurship. They understand the ins and outs of owning and running a business and can provide you with the financial tools and solutions to help your business succeed. Learn more at Citadel Credit Union.

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Phil Sutliff is the Head of Business Banking at Citadel Credit Union. Citadel offers a full suite of dynamic products and services for businesses in the Greater Philadelphia area that are looking for a better banking experience. Unlike traditional banks, Citadel Business Banking is built upon the Credit Union’s not-for-profit status, which allows for a unique level of service and commitment to help build financially strong businesses that directly influence and care for our communities, families, and overall local economic health.