Small Business Tips to Free Up Time and Improve Cash Flow

Small Business Tips to Free Up Time and Improve Cash Flow

Running a small business is a labor of love, but at some point most owners realize they need to free up time – both for themselves and their employees – for activities that lead to growth.

For one Pinnacle client, that moment came when their system of circulating invoices for approval and hand-keying data was taking too much time, risking late payments and errors and frustrating employees and vendor partners.

Other owners reach that “a-ha” moment when cash flow isn’t smooth and consistent despite the company having robust sales. In any case, as businesses grow, so do the risks posed by out-of-sync or manual processes.

If your small business has reached this point, consider the following areas for improvement.

Cash Segmentation and Optimization
There are some natural divisions of cash movement in every business: accounts payable, payroll, accounts receivable and taxes. Some cash needs to move in and out on a regular basis, some less frequently and some should be protected. Set up your account structure, sweeps and allocation with limited access and automated movement. This helps smooth cash flow and prevent fraud. Businesses generally start with three basic accounts:

  • Reserves (can be used for estimated taxes and to shield profits)
  • Income (can be set up as a deposit-only account that sweeps to your reserve account)
  • Payables (receives funds allocated from the reserve account)

As your business grows, you may want to consider breaking out a separate payroll account. It’s also a good idea to have a separate tax reserve account. This can be a fixed amount (based on estimated sales tax and income tax based on profits).

Treasury products like zero balance accounts and sweep accounts can be helpful in consolidating leftover cash and automating  allocation to a line of credit or investment account.

FDIC Insurance
Make sure your accounts are structured to maximize the FDIC insurance for your accounts. In addition to putting deposits under different categories of ownership, networks of banks have agreements to distribute funds in excess of $250,000 among the other member banks in the network so the deposits are FDIC insured. Pinnacle is a member of the Intrafi Network (also previously known as Promontory Interfinancial Network, CDARS or ICS).

Streamlined Payables
You have a number of options to improve how and when you pay expenses. If your business is still using checks, shifting to electronic payments will dramatically improve efficiency, security and reporting.

AP Automation takes it one step further, allowing your vendors to send invoices directly into an online platform for capture, where you can electronically route them to approver(s) based on settings that you control. Approved invoices appear as a list in the dashboard for immediate or scheduled payment by check, ACH or virtual card, giving you control over how and when the transaction occurs.

If your business does use a high volume of checks, consider automated reconciliation to match a digital copy of the check to the one presented for payment.

Faster Collections
To improve the speed at which your customers pay, you can automate invoicing and offer more methods of payment. Taking credit, debit and ACH payments are key for most businesses. Depending on your industry and clientele, you may also choose to partner with a payment app such as PayPal, Venmo or Zelle for some smaller transactions. Some businesses find that conveniences like text-to-pay or QR codes drive faster payments and improve customer satisfaction.

If your business receives a large volume of checks, you can free up time and streamline deposits using remote deposit or lockbox services through a P.O. Box where your bank receives and deposits check payments in large batches. Cash-intensive businesses may benefit from the convenience of bank courier services, which not only enhance cash flow but are also more secure, using armored vehicles.

Above all, don’t hesitate to “seek professional help” from a financial advisor who can help you find ways to take time-consuming, manual work off your plate, speed up receivables, even out cash flow and automate just-in-time payables.

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This article has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, or accounting advice. You should consult your own tax and accounting advisors before taking any action(s).