Managing Cash Flow - Essential to Small Business Success

Small businesses are a key pillar of our nation’s economy, providing important workforce opportunities and delivering growth and innovation to the communities in which they serve. However, when it comes to cash flow, small businesses face big challenges protecting their employees, understanding the risks to their business, and managing supply chain disruptions. For many, these challenges have only become more intense since the business environment drastically changed due to COVID-19 in the first quarter of last year.

Small business owners had to pivot their business models to continue serving their customers in this complex environment and many are expressing optimism about the future of their businesses as we begin 2021. According to a recent online survey conducted by the largest bank in the U.S., JP Morgan Chase, almost two-thirds (64%) of small business owners agree that the changes they made to their business in 2020 will continue in 2021, with nearly the same amount (63%) stating that they are optimistic about their long-term future (2022 and beyond). We share this same optimism for West Chester and Liberty Townships and our Tri-State region.

While business owners may remain resilient and optimistic, cash flow as a topline business issue is unlikely to go away anytime soon. Access to cash – money in your bank account, dictates how well your business will grow or survive. Successful small business owners and leaders recognize that cash flow problems are their leading financial challenge and are as important as liquidity – the ease in which an asset can be converted into ready cash without affecting its market price, and access to capital – the difference between total assets and total liabilities.

To help support your organization’s financial health, here are a few questions to ask yourself that can help you identify potential cash flow shortfalls:

  • When reviewing your monthly performance against your budget, are you seeing any trends?

  • Are you running out of cash or are short of cash at any point during the month?

  • If your business has debt, how would you rate the way you are managing the debt?

  • What credit options do you have in place, including planned situations where you would need a line of credit?

  • What are your company’s baseline operating costs for one month? Keep in mind significant changes in your business – inflection points, which would affect operating costs over several months.

  • Do you have access to cash for your business if there is a payment delay from a customer, or you experience a slower month?

When you have a clear view of your business’ financial health, there are several credit options that you may want to review that can help you better manage your cash flow.

Loans. Though not ideal when trying to cover operating costs, loans are a good option for long-term large-scale purchases such as large equipment, facility needs and upgrades.

The HUB Business Center’s Access Business Finance offers an affordable 504 SBA loan. For more information, go to:

A Line of Credit. This is a revolving loan that allows access to a set amount. A line of credit can be a useful tool for a business to have in place in the event of an unexpected expense such as a quick, unplanned large purchase or cash outlay.