Business owners know that there are countless things to keep track of, the most important being their business’ finances. Unlike large corporations, small businesses have less cash reserves which means they have to be even more diligent about keeping their finances on track.

Mismanaging their finances puts small business owners at serious risk and doesn’t allow them to properly prepare for unforeseen circumstances, such as the COVID-19 pandemic and various lockdowns.

In this post, we look at five ways you can easily keep your small business finances on track, helping you stay afloat and thrive even during treacherous times.

1. Conduct a cash flow analysis

The old adage, “cash is king” applies to everyone, including small businesses. In fact, poor cash flow management is one of the top reasons small businesses fail. Cash flow is essentially the funds moving in and out of your business.

Positive cash flow is when the money coming into your business (e.g. from sales) is more than the amount leaving your business (e.g. expenses). Negative cash flow is the opposite, with more money leaving than incoming.

Cash flow is important for a small business owner because it allows them to cover short-term debt such as paying suppliers and staff on time, gives them more negotiating power by being able to make purchases without credit or financing, lets them seize new opportunities, puts them in a favourable position when they need loans from banks, and so much more.

Now that you know what cash flow is and why it’s important, let’s move on to creating a strategy for your cash flow management. The first step to managing your cash flow is to know where your business stands by conducting a regular cash flow analysis. To do this you can generate a cash flow statement using accounting software.

A cash flow statement will pin-point any cash flow problems and even use this information to create a cash budget for the future. Accounting software will automate a lot of processes and consistently update information including listing transactions that are connected to your business bank account. With this information, you have a clear picture of your cash flow at all times and know where your business stands.

2. Invest in accounting software

Given the importance of cash flow, it’s no wonder small businesses are tossing their spreadsheets in favour of accounting software to track their business finances. Accounting software helps businesses create cash flow statements and gives them the ability to forecast cash reserves, which has been key during these uncertain times.

Some accounting software even has a dashboard that aggregates various metrics to showcase your business finances at a glance. Not only will accounting software give you a clear picture of your business performance, it will also help you stay on top of your business finances.

For example, when it comes to outstanding payments, you can easily review your transaction history to see who owes you money and how long ago the invoice was issued. Accounting software lets you automatically send friendly reminders to unpaid invoices, saving you precious time. Some software even has the ability to turn quotes into invoices.

Speaking of automation, accounting software will automatically file VAT returns, keeping you compliant with the Making Tax Digital (MTD) initiative.

3. Create a solid plan for late payments

Unfortunately, small businesses have been hit the hardest during the pandemic, with reduced staff, having to pivot their product or services, and of course lost revenue. One problem that has remained consistent and perhaps been amplified during this time is late payments. Just as business plans are important to drive a company, so too is having a plan in place to tackle pesky problems like late payments.

One way to prevent late payments is to have an incentive for clients to pay early, like a payment bonus, that way they’re less likely to pay at the last minute. On the flip side, you could include a late payment fee to deter paying late.

Another tactic to prevent late payments is to make it easy for your customers to pay. You can add a “Pay Now” button to your invoices which allows customers to pay directly from the invoice, a win-win timesaver for everyone. Offering payment plans is another way to make payments easier. Customers may be more willing to pay faster if it’s more financially manageable over a period of time.

Lastly, you can check the credit rating of any new customer who places a large order. If they have poor credit, this may also mean that they have poor cash balance, so you may think twice about fulfilling their large order.

4. Separate your personal and business finances

Keeping your small business finances on track means steering clear of avoidable risks that can negatively impact you and your business. When you start mixing your funds, this opens you up to liability, putting your personal and business assets and finances in harm’s way.

There are effortless ways you can keep your personal and business finances separate: open a business bank account, have a business credit card, build a business budget, and keep your personal and business receipts independent of one another.

Keeping your personal and business funds unconnected will give you more legitimacy as a business owner, help you build business credit, and make your and your accountant’s life easier during tax time.

5. Hire an accountant

Small business owners can benefit from hiring an accountant to manage their business finances. Accountants come with a plethora of knowledge and experience and are more than just extensions of accounting software. Accountants will help identify any financial issues, create credible revenue forecasts and even improve your overall business plan.

Accountants don’t just help small businesses maintain their finances; they also help them to grow their company. For example, accountants can provide people-focused financial metrics (e.g. operating profit per employee and average expense per employee), helping small business owners expand their most important asset – their workforce.

That’s why it’s so important to create a good working relationship with your accountant. Be open with them about your business goals, and be receptive to their feedback regarding your finances.


While having a solid business plan is beneficial before you start your business, implementing tactics to keep your business finances on track is crucial while running your business. Doing so will set you up for success, whether you’re in the startup phase or have been a business owner for a while.

The more you apply these strategies, from separating your personal and business funds to incentivizing clients to pay early, the better off your business will be.

If you need advice on how cloud accounting can help your business and create a cash flow statement to give you an overview of your business finances, you can request a free consultation right here. Applying these strategies will help keep your business finances on track and thriving even during the most difficult times.