Tips for Managing Your Cash Flow


When it comes to the health of your small artisan business – or any business, large or small – cash is king.

Managing your cash flow – that is, making sure you have enough cash coming in to pay bills and yourself – is the cornerstone of creating a successful business model.

But the nature of artisan businesses often means cash coming in spurts, or sometimes not at all. So how can you keep cash flowing if the spigot has run dry?

Here are tips from financial experts on creating a successful cash flow strategy:

Want to Understand Cash Flow? Know Thy Budget First

You don’t need a crystal ball to project your future cash flow. You just need good data on what is happening in your budget today.
While there are many software programs available to help you create a budget, you can use a simple Excel spreadsheet or even a paper and pen to get started, suggests consumer finance expert Kevin Gallegos, vice president of Freedom Debt Relief, LLC, based Tempe, Ariz. (
Gallegos suggests the following:

1. Add up all monthly net household income for a given month. If possible, look at the upcoming month and determine what you expect and/or know you will receive. As you move from month to month, you will likely start to see some patterns. "The key is to remain very conservative, especially at first,” says Gallegos.

2. Categorize your ongoing monthly expenses into fixed, variable and spending money. Fixed expenses, for example, are rent or mortgage payments. Variable expenses that are "must-buys” such as food, gas, medicine, savings, taxes (for those who are self-employed). Finally categorize your spending money (for unexpected expenses and entertainment). Add those up to understand your cost of living. "Make the emergency fund a part of the budget,” Gallegos advises. Aim to save for several months of your business and personal expenses.

3. Subtract expenses from income. That number is your bottom-line cash flow – that is, how cash is flowing into your life on a daily basis. This cash flow will determine if you have enough money to pay your bills and other expenses on time. "If it is negative or does not help you achieve your short- and long-term financial goals, do a ‘gut check’ and find a way to either increase your income or reduce your expenses,” says Gallegos.

Rev Up Your Receivables

If you always got paid the moment you made a sale, you probably would not have cash flow issues. However, in the real world, this does not happen and most likely you will have to wait to get your money several days – or even months – after the sale.
But there are ways to help get your money quicker – and help turn your receivables into cash, that in turn will help your cash flow:

* Ask for cash payments first, then give credit card options. "Many artisans ask at the point of sale, ‘Will that be Visa or Master Charge?’ which leads the buyer to those two choices,” says Larry Baumgart, principal at Advanced Business Appraisers of Portage, Mich. A better choice for your cash flow would be to say "Will that be cash?” instead. "This leads to the purchaser to thinking about a cash option first,” says Baumgart, which is better than paying a 4 percent processing fee and waiting for the money to be deposited into your account.

* Know payment policies ahead of time. If you sell to a gallery or retail store, make sure that you know the payment policy. Your cash flow management will be different if each piece is paid as it is sold – or if one check is cut at the end of the month. Don’t be afraid to negotiate for quicker payments to help with your cash flow, suggests Baumgart.

* Send out invoices promptly. As soon as a sale is made, mail or better yet, email an invoice. And don’t assume you have to offer payment terms, notes Tom Pryor, director of the Small Business Development Center for Enterprise Excellence of North Texas "Instead, ask for cash before offering a 30-day invoice payment that ends up being 60-90 days,” he says. You can also offer discounts to customers who pay their bills immediately.

* Don’t write off slow-paying accounts. Instead of refusing to do business with a slow paying customer, you can instead offer a cash on delivery (c.o.d.) to speed up the process and keep your customer at the same time.

* Don’t confuse inventory with cash. While inventory can potentially be cash in your pocket, don’t count it as cash. If there is inventory that hasn’t moved in a long time, look for ways to get rid of it (in a sale, for instance) to liquidate that inventory to help generate cash flow.

Pare Down Payables

While you’re revving up receivables – do the opposite with your payables. That is, pay as closely as you can to the due date without incurring late fees.
For example, if your payment is due in 30 days, don’t pay it within 10. If possible, pay online on the 29th day (and make sure it is credited to your account that day). This will help you retain the use of your cash as long as possible. Use business cards judiciously and only if you don’t have to make payments until 25 days after the statement – then pay it in full.

If you must be late on a payment, be honest with the vendor, suggests Baumgart. "Many people will be flexible on payments if they know that the payer is struggling and needs a break, but only if the artisan calls ahead of time and discusses it with them,” says Baumgart. "By not calling, the vendor or person that is owed the money usually feels that they are being cheated and they tend not to want to work with the debtor.”

What To Do When Cash is Short

If cash is short and creditors are hounding you the first thing you might think to do is to get an outside job somewhere, even part-time, to make ends meet. But think carefully before you do that, says Baumgart. "These part time jobs can be a creative distraction for an artist,” he says. Instead, think of ways you can improve cash coming in through alternative venues that are related to your artisan endeavors, such as selling your products on the Internet.

"You have to experiment to see what works for your type of product. EBay may work for some products, while others may not sell as quickly,” says Baumgart. Explore alternative sales outlets in your community, such as using your products as fund raisers for local schools or churches, where some proceeds would go toward supporting the non-profit – but some cash will go into your pocket.
The best advice to making sure you are not stuck with cash flow problems is to plan ahead and sock away three to six months in cash for your personal and business expenses, says Julie Murphy Casserly, an independent financial planner and author of The Emotion Behind Money (

"It’s not a matter of if a shortfall will happen, the question is ‘when,’” says Casserly.

Gallegos agrees and adds: "The idea of socking away half a year’s expenses can induce mild panic,” he says. But it can make the difference between surviving cash flow problems and going under because of them.

But before you write this bit of financial planning wisdom as impossible, consider what it means: a little nest egg will keep you prepared for any unexpected loss – be it a downturn in sales, the economy, an illness, or any other emergency. And it will keep your cash flow flowing in a positive direction.


MARCIA PASSOS DUFFY ( is a freelance business writer based in New Hampshire and is a member of the state’s artisan and business organization, NH Made. Marcia’s articles have appeared on Yahoo Finance, CNBC,,, Smart Business Magazine, The New York Times Lifewire, The Weather Channel, among others; she is the author of the book, Be Your Own Boss. She also publishes two online magazines, Home Office ( and The Heart of New ( Marcia wrote this feature article exclusively for the Association of Artisan Businesses (, an organization dedicated to the preservation and promotion of the artisan industry.

Tips for Managing Your Cash Flow

By: Marcia Passos Duffy