Watching your small business or freelance career grow is incredibly rewarding. As your revenue starts climbing and your client list expands, you can finally feel the momentum of a solid, sustainable business. But there’s one critical element that can easily destroy growth: Cash.

You likely already know this, but at the end of the day, if you don’t have the cash on hand to pay your bills or yourself, a growing revenue line won’t keep your business alive. Without positive cash flow, on-paper profits are effectively meaningless.

So, how do you avoid the dreaded cash crunch and keep your business thriving? It’s time to get serious about cash flow management.

At TrulySmall, we believe that managing your finances should be highly accurate, yet effortlessly simple. Here are five practical ways you can get a better handle on the cash coming in and out of your business.

Step 1: Reconcile Your Books Daily

Imagine waking up, pouring a cup of coffee, and taking just five minutes to see exactly how much money went in and out of your accounts the day before. Do you think you’d have a better grasp on your financial health if you reconciled your books daily? Absolutely.

By taking a few minutes every morning to reconcile yesterday’s transactions, you eliminate the mounting stress of wondering if you can cover next month’s overhead. Accurate, daily tracking gives you real-time insight into your cash flow.

Fortunately, staying on top of this is incredibly easy with TrulySmall Accounting. Our smart, automated software does the heavy lifting, matching transactions so you can start your day with perfect financial accuracy. Plus, with our new Business Performance Dashboard, you get a complete snapshot of your operations right when you log in, including month-to-month comparisons and a recent transaction summary, ensuring you never miss a beat.

Step 2: Review Your Accounts Receivable Weekly

Accounts receivable (AR) can quickly become your Achilles’ heel if left unchecked. As a refresher, your accounts receivable is the total balance of money owed to you by your clients. For instance, if you invoiced a client for $5,000 today, but they only paid a $500 deposit, you have an outstanding AR balance of $4,500.

While AR is technically considered an asset on your balance sheet, unpaid invoices don’t pay your bills. By reviewing your AR balance every single week, you know exactly how long a payment has been outstanding and who you need to follow up with. Don’t fall into the trap of assuming a client will pay, only to realize 90 days later that they forgot.

If you did the work, make sure you collect the cash. With TrulySmall, you can easily track who has paid and who hasn’t. You can even use our Automatic Client Reminders to send friendly emails before or after an invoice is due, helping you get paid faster without the awkward manual follow-ups.

Step 3: Monitor Credit Card Balances and Credit Lines Monthly

Debt can be a powerful tool when used as a strategic investment to grow your business. However, just like outstanding invoices, you need to be highly vigilant about the interest accruing on your credit balances.

If you are regularly paying for operational expenses with a line of credit or a business credit card, remember that interest is taking a cut of your hard-earned profits. Don’t let your debts quietly snowball out of hand.

Make it a habit to review your credit card balances and line of credit withdrawals weekly or monthly. Keeping a sharp eye on your liabilities is a simple way to maintain financial accuracy and avoid cash flow shocks down the road.

Step 4: Save for a Rainy Day with Cash Flow Projections

Do you run a business with seasonal or uneven cash flow? For example, maybe you are a freelance designer who lands massive contracts in the spring, but experiences a dry spell in August.

If this sounds familiar, you need to actively stash cash away to keep your business running smoothly through the slower months. A great way to prepare is by utilizing TrulySmall’s Cash Flow Report. Now, you can easily generate 30, 60, or 90-day cash flow forecasts based on your current bank balances and upcoming unpaid bills or invoices.

Take the guesswork out of your slow seasons by running up to three different forecasting scenarios simultaneously. With this level of foresight, you can accurately portion out your cash reserves when revenue is tight and make business decisions with total confidence. (And never forget about taxes, make sure you are automatically setting aside a percentage of your income each month so you aren’t blindsided by a massive tax bill at year-end!)

Step 5: Fund Next Month’s Expenses with Last Month’s Cash

This is a classic personal finance budgeting rule that translates beautifully to small business management. Ask yourself: How much cash did I actually collect last month? Whatever that number is, that should be your maximum expense budget for the upcoming month.

Let’s break it down. Say you generated $15,000 in on-paper revenue last month, but you only collected $8,000 in actual cash. You should plan to keep next month’s expenses at or below $8,000. If your forecasted expenses are higher, you need an immediate plan to collect more cash or cut costs.

This simple, highly effective strategy keeps you one step ahead, ensuring you only spend money you actually have in the bank.

Take Control of Your Cash Flow Today

Getting a better handle on your finances is the single most important thing you can do to keep your small business or freelance operation thriving. To recap, here is your 5-step cash flow action plan:

1. Reconcile Your Books

2. Review Your Accounts Receivable 

3. Monitor Credit Card Balances and Credit Lines

4. Save for a Rainy Day with Cash Flow Projections

5. Fund Next Month’s Expenses with Last Month’s Cash

Ready to take the stress out of cash flow management and leverage powerful forecasting tools? TrulySmall Accounting is designed specifically for small business owners and freelancers who need perfectly accurate and simple accounting. Try TrulySmall today and see how easy managing your finances can really be!