Managing your cash flow is one of the most important steps to keeping your business or personal finances stable. Whether you’re running a small business or simply trying to stay on top of your monthly bills, understanding how to manage cash flow ensures you’re never caught off guard. Hi, I’m Bette Hochberger, CPA, CGMA and for today’s quickie, I’ll walk you through the basics of cash flow management, why it matters, and simple steps you can take to improve it.

What is Cash Flow?

Let’s keep it simple: cash flow is the money coming in and going out. For a business, cash flow includes income from sales, loans, or investments (money in) and expenses like rent, salaries, and utilities (money out). For personal finances, it’s your income (like your paycheck) versus your spending on things like groceries, rent, or entertainment.

When your income is more than your expenses, that’s positive cash flow—and it’s exactly what you want. When your expenses are higher than your income, that’s negative cash flow, and it leads to financial stress if not addressed quickly.

Why Cash Flow Management Matters

Good cash flow management allows you to:

  • Pay bills on time without stressing about running out of money.
  • Plan ahead for big expenses, like repairs, vacations, or investments.
  • Avoid debt by not having to rely on credit cards or loans.
  • Grow your savings or reinvest in your business.

Without proper planning, even profitable businesses or individuals can struggle if too much money is tied up in expenses at the wrong time.

5 Simple Steps to Manage Cash Flow

Track Your Cash Flow

Start by keeping track of all the money coming in and going out. Use a simple spreadsheet, budgeting app, or accounting software to record every transaction. For businesses, this means tracking sales, invoices, and expenses. For personal finances, list your income and bills.

Create a Budget

A budget is your roadmap for spending. For businesses, plan for fixed costs like rent and variable costs like supplies. For personal finances, list essentials like rent, food, and utilities, then decide how much is left for extras like dining out or hobbies.

Build a Cash Reserve

Set aside a portion of your income into savings. This reserve acts as a safety net for emergencies, like unexpected expenses or slow months in business. Experts recommend saving at least 3-6 months of expenses.

Speed Up Incoming Payments

For businesses, encourage customers to pay invoices faster by offering early payment discounts or sending reminders. For personal finances, set up direct deposits or automated payments to ensure you receive your income on time.

Cut Unnecessary Expenses

Review your spending regularly and identify areas to cut back. For businesses, this might mean renegotiating supplier contracts. For individuals, it could mean canceling subscriptions you no longer use.

Tools to Help You Stay on Track

Managing cash flow doesn’t have to be complicated. Here are some tools to make life easier:

  • Budgeting apps like Mint for personal finances.
  • Accounting software like QuickBooks for businesses.
  • Spreadsheets for a simple and free way to track income and expenses.

Cash flow management is all about staying in control of your money so you can meet your goals without unnecessary stress. Whether you’re building a business or just trying to save for a rainy day, following these steps can help you take charge of your finances. Remember: small changes—like tracking your expenses or cutting back on little luxuries—can make a big difference over time.

I’ll see you next time!