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May 31, 2024
Growing Business

Cash Management Practices for Small Businesses


Maintaining a positive cash flow to support growth is one of the main focuses for many small business owners.

As you know, circumstances may arise that can limit cash flow for your company and cause you to work within tight margins. Whether this is due to unforeseen barriers, or a delivery cycle that has not caught up to where you need it to be, cash flow challenges can impact the success of your small business.

Below are a few tips to consider to make sure your company’s cash management plan is ready and adaptable for whatever circumstances may come your way.



Include contingency funds in your budget

A common issue for small businesses is to underestimate annual costs. To help cover additional or unexpected expenses, it is a good idea to always include contingency funds in your budget. If you end up not needing the funds, you can roll them into your emergency cash reserves or reallocate them towards next year’s budget.


Have policies in place for accounts receivables

When payments from repeat customers are delayed too often, it can impact your company’s ability to order more inventory or even pay bills. That’s why it is a good practice to establish a payment policy that helps protect your business from such an issue. Consider implementing a late-free penalty to deter habitual delayed payments, or if a customer does not pay on time too often, consider whether you wish to continue doing business with them or if it would be better to look for an alternative.


Closely manage inventory

Inventory management is an important aspect of smart cash management practices. Depending on the type of business you own, storing too much inventory can become a problem if it is not selling quickly. It can tie up space in your warehouse and strain your cash flow. Another inventory challenge can stem from sudden growth, where inventory might get depleted faster than it’s able to be refilled. When this happens, cash flow problems you may not have noticed can accelerate and tighten margins. Take into account not only your current stock and order requests, but also sales forecasts, cash on hand, your suppliers’ capabilities and any other factors to help ensure inventory is moving at a pace that is appropriate for your company.


Seasonal or cyclical sales

Certain times of the year are busier than others, and your business should plan ahead to be prepared. Review previous years’ trends to get an informed estimate of how much cash you might need on hand and build your inventory to be better positioned for the additional demand.

If your business is new and you have not experienced your busiest season yet, review your business plan and make any needed adjustments to your estimate of what business could look like when at its peak.

As your business grows, you will gain insights into how it performs and how it relies on its cash flow throughout the year.

To help your business continue to move forward, Trustmark offers a suite of cash management products and services that can be customized to meet your business needs:

  • Accounts receivable and payable solutions
    - Simplify money management with fast, secure electronic transactions
  • Account Monitoring Services
    - Reduce the risk of fraud
  • Reporting Options
    - Save time, money and improve your bottom line with reporting and reconciliation services
  • myTrustmark® Business
    - Online and mobile banking that gives you the freedom and control to manage your business the way you want

To discuss the products and services that can help you improve your business efficiency and effectively manage your daily financial operations, contact our Corporate Treasury Services team at 855.731.0243 or click here for more information.


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