Tips for Managing Cash Flow in the Early Stages of Your Small Business

Managing small business expenses while trying to grow revenue is a delicate balance. This is especially true if you own a small business that is still in its early stages and doesn't yet have a regular cadence of money coming in.

A QuickBooks survey from 2022 found that 68% of small businesses experience cash flow problems at some point. All businesses have to figure out which cash flow management techniques work best for them, but here are a few tips for managing your small businesses' money.

1. Find the right payroll schedule

If you have even a few employees, you'll need to figure out when to pay them. For some businesses, that may be weekly, while others may benefit from a bi-weekly or monthly schedule.

For example, small businesses that make sales on a daily basis may be able to pay employees on a weekly basis, while businesses that receive large orders monthly may benefit from a bi-weekly payroll schedule. Some states have payday schedule requirements, so make sure to review your state's regulations when setting the payroll schedule.

How to do it: In the early stages, you may need to experiment with what schedule works best for your business and your employees. Try a payment schedule for a while and then adjust it later if it doesn't work well for your employees or the business's cash flow. Finding the right payroll software can go a long way toward helping you figure this out.

2. Use a business credit card to cover expenses

In the early stages of your small business, you'll likely have to take on some debt to grow. Setting up a physical shop, creating an e-commerce website, buying inventory, and other expenses add up fast.

A business credit card can be a good way to cover some of these costs as you get the business up and running. These cards have higher credit limits than personal cards do and they report to business-specific credit reporting agencies, which helps you build credit as a business.

How to do it: Find a business credit card that offers cash back and other rewards, like a sign-up bonus. Some business cards also have 0% APR introductory offers for up to 12 months, which can help you buy what you need for your business without immediately accruing interest. Just make sure to look at your statements monthly to evaluate how much you're spending.

3. Time payments wisely

One of the most critical parts of cash flow management is knowing when to pay a bill. Paying all bills simultaneously could drain your cash, leaving you without funds to cover upcoming expenses.

Instead, prioritize your bills to ensure the most important ones -- like payroll -- are covered first, then set a schedule for the rest. Just make sure you make your payments on time so your business can build credit and you don't upset your suppliers.

Most small businesses will likely benefit from having a business checking account. This will help you manage your cash flow by keeping all of your expenses and revenue in the same account.

How to do it: Every small business has to figure out the right cadence for paying bills, but one way to do it is to use good accounting software. By tracking your revenue and expenses with accounting software, you'll be able to figure out how to time your bill payments efficiently.

Managing your small business's cash flow is no easy task. Fortunately, there are more tools and resources available than ever to help you. The Ascent has compiled reviews of small business software for everything from expense tracking to taxes, and you can view them all on our small business page.