Merchant Blog

Blog Article: Small Business Cash Flow Tips for Canadians

Whether you are just starting out, or your business has been around for multiple generations, cash flow is the most important metric by which a small business may either prosper or decline. No matter how great your profit or popular your enterprise, small business cash flow management is critical to understand and master.

Tools for Small Business Cash Flow Management

Products like the Merchant Advance have been designed to help small businesses optimize their cash flow for seasonality and changing market conditions, but there’s a lot that owners themselves can do to make their cash flow management more efficient and more effective.

  • Set Clear Terms

When dealing with your suppliers and your customers, set out clear terms for repayment of any invoices. Get it in writing! 30 day terms are considered an industry standard among many businesses.

  • Be Inventory Smart

For small businesses that have a regular inventory schedule – like coffee shops for example, figuring out how not to overspend on inventory is key to helping cash flow optimized. Experts suggest buying as little as possible to start—but make sure that you can get a quick delivery, as you never ever want to run out of anything. Once you have a better idea of how to project your cash flow and inventory needs over a longer term, adjust your inventory to compensate.

  • Build an Emergency Fund

Emergency funds aren’t just for personal finance. They can be used for small business cash flow management as well. Always have enough cash reserves to cover your slow months in business. You should be safe if you can have 3-6 months or more to cover all unknown or variable expenses that may come up.

  • Offer Incentives (And Benefit From Them)

One option to increasing cash flow is to offer your customers discounts if they pay early. While this practice may impact your profit margin, it may help your management of cash flow by incentivizing customers to make payments earlier than billing cycles typically require. Your company may also take advantage of this with suppliers and others that you owe, but be careful that your early payments of debt don’t leave you with a cash flow shortfall.

  • Take Your Payments Online

Migrating your payments processing to e-banking methods as opposed to traditional cheques will help your cash flow by decreasing the processing time between when you get paid and when funds actually clear into your accounts.

  • Track, Track, Track

Once you’ve established your cash flow targets, track them regularly. If you’re a new business, project your cash flow every month for the first year, and then quarterly. If you’re growing fast or financially unstable, consider preparing cash flow projections monthly or even weekly.


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