Manage cash flow basics

Cash flow is the timing of money in and money out. A profitable month can still feel tight when bills arrive before customer payments. Three habits fix most timing problems: invoice the same day work completes, ask for deposits on large jobs, and negotiate supplier terms that match your collection cycle. Know your minimum operating balance — the number below which you stop making optional purchases. A common mistake is treating cash flow problems as a sales problem. Owners chase more revenue when the real gap is timing between paying suppliers and collecting from customers. Adding sales without fixing timing usually makes the squeeze worse, because new jobs still need materials and labor paid up front while payment lags behind. Before adding volume, check whether the shortage is caused by low sales or by the gap between spending and collecting, since the fix is completely different for each. To decide which lever to pull first, look at your accounts receivable aging list and ask how many days, on average, customers take to pay after you invoice. If that number has crept upward over the last few months, tighten collection terms before anything else. If the number is stable and small, your problem is more likely supplier timing or a lumpy bill calendar, and the fix is spacing large payments rather than chasing customers harder. You can judge whether your cash habits are working by watching your minimum balance over eight to ten weeks. A healthy pattern dips and recovers on a predictable rhythm tied to your billing cycle. A troubling pattern trends downward across cycles even though sales look steady, which signals a structural gap rather than a one-time bump. If you see the downward trend, treat it as urgent even if this month's bills are covered. When a shortfall hits despite your planning, do not silently delay every payment at once. Call your largest supplier first, explain the situation honestly, and ask for a short extension before you miss the due date rather than after. A bakery once faced a $3,000 gap when a walk-in freezer repair landed the same week as payroll; the owner called the equipment vendor, arranged a two-payment split, and kept payroll on time, which preserved both relationships that mattered most.

Key takeaways

• Three habits fix most timing problems: invoice the same day work completes, ask for deposits on large jobs, and negotiate supplier terms that match your collection cycle.
• Know your minimum operating balance — the number below which you stop making optional purchases.
• Faster invoicing directly shortens the time to payment.

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