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Cash Flow

Keep More Cash: Better Timing on Receivables and Payables

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When we talk about running a healthy business, cash flow doesn’t always get enough attention — specifically how managing receivables and payables plays a significant role in it.

If money isn’t coming in on time, or you’re paying bills too early without a plan, your cash flow can take a hit, even if your business is doing well overall. Let’s look at a few ways to manage both sides more effectively.

Managing Receivables: How to Get Paid Faster

Send Invoices Right Away

Delays in invoicing almost always lead to delays in payment. Once the job is wrapped up or the product has been delivered, go ahead and send the invoice. It sets clear expectations and keeps things moving.

Make Your Payment Terms Clear

Clients should be aware of the exact payment due date, whether it’s “due on receipt” or “net 15,” and adhere to it. It should also be clearly indicated on the invoice.

Use Gentle Reminders for Consistent Results

While chasing down customer payments may not be the most enjoyable part of running a business, it is an essential component of the billing process. Sending out a quick email reminder before the due date, along with a follow-up if it goes late, can go a long way. Remember, an accounting system like QuickBooks can automate that process and take one more thing off your plate.

Offer Incentives for Faster Receivables

Offering a small discount, like 2% for early payment, can help encourage quicker turnaround. On the other hand, setting a late fee and enforcing it may help if you consistently deal with delays.

Accounts Payable: Keep Cash in the Business Longer

Use the Full Payment Window Strategically

If a bill isn’t due for 30 days, there’s no need to pay it on day 5—unless there’s a perk like a discount. Keeping that cash on hand a little longer gives you more flexibility to handle other expenses.

Keep Track of Payment Due Dates

It’s easy for a bill to slip through the cracks when things get hectic. A simple checklist or calendar can help you stay organized and keep your vendors happy.

Automate Payables with Accounting Tools

If you’re using something like QuickBooks or a bill payment app, make sure to take advantage of the tools they offer. They make it easier to see what needs to be paid and when, so you’re not digging through emails or spreadsheets to stay organized.

Communicate with Vendors When Cash Flow is Tight

If cash flow is tight, don’t go silent. Reaching out to a vendor before a payment is late can open the door to flexibility, like a payment plan or extended terms.

Why Managing Receivables and Payables Creates a Better Business Rhythm

Good cash flow isn’t about luck—it’s about timing. When you tighten up how and when you get paid, and make smart decisions about when you pay others, your business gains breathing room. It puts you in a better position to plan, grow, and stay steady, even when things get busy.

Start small. Improve one area at a time. You’ll be surprised how much smoother things run when money moves on a schedule that works for you.

Utilize Invoice Reminders in QuickBooks Online for Improved Cash Flow

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Managing unpaid invoices is often one of the least enjoyable tasks when running a business. While no one likes reaching out to customers for overdue payments, failing to do so can negatively impact your cash flow.

Setting up automated email reminders in QuickBooks Online can help streamline the process. Not only will it reduce the stress of chasing overdue payments, but it also saves you valuable time—both by easing your concerns and eliminating the need for manual follow-ups. Here’s how to set it up.

A Simple Process

Setting up automated reminders is straightforward. The trickiest parts are deciding on the timing of the reminders and crafting the right tone for your emails.

Start by clicking the gear icon in the upper-right corner. Select Account and Settings under Your Company menu. Scroll down to the Sales tab and click on it. Next, scroll to the Reminders section. If the Automate Invoice Reminders option is off, click it to turn it on.

QuickBooks Online allows you to set up to three different reminders for various time periods. Click the down arrow on the Reminder 1 line:

QuickBooks Online allows you to customize your invoice reminders in a number of ways.

Three Different Reminders

QuickBooks Online offers three reminder options, each labeled with a suggested timing: before the due date, on the due date, and after the due date. However, you don’t have to follow this suggested schedule. For the first and third reminders, you can specify how many days before, on, or after the due date the email should be sent. You can only set the second reminder to send on or after the due date. If you prefer, you can set all reminders to send after the due date, which is a common approach.

Customizing Your Email Messages

You can customize the email greeting (e.g., “Dear”) and choose how the recipient should be addressed—by their full name, first name, or company name. You can also modify the subject line to suit your needs.

Below the greeting and subject line, you’ll find the email message that QuickBooks Online will send to the customer. QuickBooks Online provides a standard message, but you have the option to edit it completely or just adjust parts of it.

Preparing Your Email Messages

You’ll notice that fields like Invoice No. and Company Name appear in brackets ([]). If you’ve used mail merge before, you’re already familiar with this concept. If not, simply put, data in brackets will automatically be replaced with real information from your QuickBooks Online file. For example, if you’re sending a reminder to Cookies by Cathy, the company name will replace the placeholder text, and the correct invoice number will appear in that field.

You’ll want to tailor your message for each reminder based on when it’s being sent. For example, the tone should be firmer if the payment is 30 or more days late compared to just seven days late. For your first reminder, consider giving your customer the benefit of the doubt—they may have simply overlooked the invoice or missed the due date.

Once you’ve set up your reminders, remember to click Save. Note that automatic email reminders only apply to new invoices. However, you can modify or turn off reminders at any time. If you need to send a reminder to a customer about an existing invoice, hover your mouse over Sales in the toolbar and click Invoices. Then, click the down arrow in the Action column next to the relevant invoice and select Send Reminder.

Take Control of Your Collections with Automated Reminders

By setting up automated reminders in QuickBooks Online, you can ensure that your invoicing process runs more smoothly and efficiently. Take advantage of this feature and make overdue invoices one less thing to worry about.

How to Read a Cash Flow Statement: Understand Your Money

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Understanding the cash flow statement is one of the most important ways to gauge your company’s financial health. Think of it as a map showing how money moves into and out of your business. Below, we’ll walk through the basics so you can read and interpret your cash flow statement confidently.

What Is a Cash Flow Statement?

A cash flow statement is a financial report that shows the money coming in (inflow) and going out (outflow) of your business during a specific period—such as a month, quarter, or year. While your profit and loss statement tells you how much you’ve earned (income) and spent (expenses), the cash flow statement focuses strictly on actual cash. This means it tracks the movement of real dollars, which helps you see whether you can meet immediate obligations like payroll and supplier payments.

Why Is It Important?

Managing Day-to-Day Operations: Even if your business appears profitable on paper, you need enough cash to pay bills, purchase inventory, and keep the lights on.

Planning for Growth: Tracking cash inflows and outflows helps you know when you can afford to invest in new equipment, hire staff, or expand your product line.

Securing Financing: Lenders and investors often look at your cash flow statement to see how stable your cash position is before offering loans or investment dollars.

Staying Out of Trouble: Understanding cash flow can prevent cash shortages that might otherwise disrupt your operations or, worst-case scenario, force you to close your doors.

The Three Sections of a Cash Flow Statement

There are three main sections: Operating Activities, Investing Activities, and Financing Activities. Each gives you different insights into where your cash is coming from and where it’s going.

1. Cash Flow from Operating Activities

  • What It Covers: When reviewing the cash flow statement, the Cash Flow from Operating Activities section captures the everyday transactions that keep your business running—such as:
    • Money you receive from selling products or services
    • Cash you spend on operating expenses (rent, utilities, salaries, etc.)
    • Cash you receive or pay for items like refunds or returns
  • Why It Matters: Monitoring this activity helps see if your business is sustainable in the short run. While profits are important, cash flow from operating activities keeps the lights on. Even if you’re posting a profit on paper, you still need enough physical cash for your business’s regular obligations.

2. Cash Flow from Investing Activities

  • What It Covers: Cash used for investments in the long-term future of your business, such as:
    • Buying or selling equipment
    • Purchasing or selling property
    • Acquiring or disposing of other long-term assets
    • Investments in other businesses
  • Why It Matters: A business sometimes needs to invest to stay competitive and grow. Spending on new technology, better equipment, or expanded facilities can eventually increase your revenue. However, because these are major purchases, they can temporarily negatively impact cash flow. That’s not necessarily bad—it could simply mean you’re positioning your business for higher earnings in the future.

3. Cash Flow from Financing Activities

  • What It Covers: Cash movement related to funding your business, including:
    • Borrowing or repaying loans
    • Issuing stock to investors
    • Paying dividends to shareholders
  • Why It Matters: Reveals how you’re financing your business—whether through new debt, equity, or other means—and how you’re paying that money back. Financing decisions usually impact the company for a long time. For instance, a loan payment schedule or expectations from new investors can shape what you do with future cash.

How to Interpret Inflows and Outflows

  • Identify Trends Over Time: Look at your cash flow statement monthly or quarterly to see whether your cash flow is improving or declining. Is there a sudden dip in cash? Figure out why.
  • Focus on Operations: Healthy businesses typically generate positive cash flow from their operating activities. If your operating cash flow is negative, investigate which expenses are higher than expected or whether revenue is declining.
  • Evaluate Investment Decisions: Not all negative cash flow from investing is a bad sign. For instance, if you just purchased new equipment that will boost production, those outflows might lead to higher inflows in the future.
  • Check Your Financing Needs: If you’re borrowing money or issuing stock, make sure you understand how those funds are used and whether you have a plan to repay loans.

Practical Tips for Business Owners

  • Keep Organized Records: Accurate numbers make reading and interpreting your statement much easier.
  • Compare With Your Budget: Check actual cash flow against your forecasted budget to catch any inconsistencies early.
  • Track Key Ratios: Simple ratios—like the ratio of operating cash flow to current liabilities—help measure whether you’re generating enough cash to cover short-term obligations.
  • Seek Professional Support: Contact an accountant or financial advisor if you feel uncertain about interpreting your cash flow statement. They can help you identify any red flags and recommend ways to strengthen your financial position.

Using a cash flow statement, you can make smarter decisions, handle financial challenges, and plan for growth when you know where your money is coming from and where it’s going. You should do this regularly, either by yourself or with the help of an accountant if needed.

How to Set Up Recurring Customer Payments in QuickBooks Online

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What Is a Recurring Payment?

A recurring payment is an invoice or sales receipt that automatically repeats on a schedule you choose—weekly, monthly, quarterly, or any frequency you need. When you set up a recurring payment, QuickBooks Online handles the repetitive work. You decide on the details and schedule; the program will do the rest.

This article will focus on automatic payments when you have the customer’s payment information on file. If you would like to learn how to set up a recurring customer invoice, read this article.

Step-by-Step Guide to Creating a Recurring Sales Receipt Transaction

  • Go to the Gear Icon in the upper-right corner of your screen.
  • Under the list menu, select Recurring Transactions. This will bring up a list of all your recurring items.
  • Click New in the top right corner to create your new recurring transaction.
  • Choose the Sales Receipt for the transaction type if you charge your customer’s card/bank account automatically (using QuickBooks Payments or another payment processor).
  • Name Your Template with a familiar name, like “Customer ABC Company Monthly Service Fee.” This will help you quickly find it later if you want to make changes.
  • Select Scheduled for the Type if you want QuickBooks to create, process, and send the receipt repeatedly automatically.
  • Set the Interval and Start/End Dates in the Interval section. In the Interval section, select how often you want the transaction to repeat (e.g., daily, weekly, monthly). Enter the Start Date (the first date you want this transaction to begin) and, if necessary, an End Date (the last date you want to charge them). You can leave this section blank or choose None if there’s no end date.
  • Select the Customer from the list and enter the Products/Services you’re charging for, the Rate, Quantity, and other relevant details. If needed, add discounts or Sales Tax (depending on your local rules).
  • Save the Template after double-checking your information for accuracy.

Tips for Success

  • Verify payment details to seeif you’re processing payments automatically.
  • Keep Customer Information Updated so receipts go to the right person or email address.
  • Review from Time to Time to ensure correct pricing, products, and services.

Automating these transactions minimizes errors and reduces the chance of forgetting to process your customers’ payments. Creating recurring payments in QuickBooks Online is straightforward, saves time, and improves cash flow.

The 13-Week Cash Flow Forecast

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One of the best tools to forecast cash requirements is the 13-week cash flow forecast. It can help a business owner predict what their cash balance will be 13 weeks in the future. It helps to answer whether there will be enough cash to cover payroll and bills for a particular week. If you’re having significant ups and downs in your cash balance, it’s the perfect tool to help gain clarity around your cash needs. Thirteen weeks may sound like an odd length to select, but it’s the length of a calendar quarter. This is the length of a financial projection that is typically used when a business is in financial distress; however, it’s also useful when a company is going through some ups and downs or simply wants to get a better handle on its cash requirements. The forecast computations start with entering cash receipts and cash disbursements into a spreadsheet. Start with actual spending and receipts for the first week, then use estimates for the remaining weeks. Include planned expenditures such as overhead, payroll, and loan payments. Add in inventory purchases. Project your receipts based on history or recent changes in your business. Once you’ve completed your forecast, you can make changes and do what-if scenario planning.  For example, if the forecast shows that you will run out of cash in week seven, you have some time to decide what you need to do to remedy the shortfall. Options might be:
  • Accelerate the collection of 30 percent of your receivables.
  • Dip into your line of credit to cover a portion the shortfall.
  • Furlough 10 percent of your workers.
Plug your selected scenario into the forecast to see how much that relieves your shortfall. The benefits of creating a 13-week cash flow forecast are many. You can see what actions need to be taken and when to take them well ahead of time. You can also see how much of an action you need to take. For example, instead of furloughing 50 percent of your staff, you may only need to furlough 25 percent.  Or instead of borrowing $50,000, you might only need $20,000. The cash flow forecast can also save time when developing your annual budget. Budgets are especially useful when business conditions are volatile or when business owners need all the clarity they can get. Try your hand creating a 13-week cash flow forecast for your business, or reach out to us for help any time.

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