Future-proofing in times of change: 4 cash flow management strategies for small businesses

Cash flow management might seem relatively straightforward, but the reality is that maintaining a healthy cash flow is one of the hardest challenges you’ll face as a business owner, especially in an inflationary environment. 

According to market intelligence firm CB Insights, running out of cash is one of the top reasons that small businesses fail^[2]. Our latest DBS SME Pulse Check Survey further confirms that “ensuring consistent cashflow and managing costs” remains a priority in the current environment, with 43% of respondents ranking it as their top business priority in 2024.

Why cash flow management is vital for SMEs

As the saying goes, cash is king. Cash is what funds your day-to-day business operations and a healthy cash flow allows you to take advantage of new opportunities as and when they arise. Strong liquidity is essential to business resilience too as it provides a buffer for you to react to sudden market disruptions and handle unexpected challenges, like higher costs and interest rates due to increased inflation. 

Most importantly, having positive cash flow allows you to pay your creditors on time. This helps you build trust and establish strong stakeholder relationships that you can fall back on in difficult times. 

While there are many reasons why SMEs face cash flow issues, one of the most common is the lack of robust cash flow management strategies. Cash flow management strategies are especially critical in an inflationary environment as the probability of running out of cash is even higher with increasing operating costs and a crunch on margins, since it isn’t always possible for SMEs to raise prices.

To help achieve a more stable cash position, here are four tips on how to manage cash flow in a small business.

1. Invest in the right tools including accounting software

Having a clearer view of your current cash flow situation can help you identify gaps and trends in advance, and pinpoint areas for improvement with more accuracy. This is where accounting software can be useful. 

While there are many platforms for basic accounting, small business owners who are serious about cash flow management can also invest in more sophisticated accounting tools which integrate directly with banking services. Thanks to streamlined integration between DBS and a number of leading accounting software providers, businesses can access a range of AI-powered tools to conduct cash flow forecasts for more accurate short-term and long-term insights. 

For example, with DBS-Xero bank feeds, your day starts with valuable insights and an updated view of your financial position, so you get an up-to-date view of your cash flow. In addition, you will be able to save time as outstanding bill payments can now be sent from Xero to DBS IDEAL for instant authorisation. Xero Account can also generate Peppol-ready e-invoices to speed up payment cycles. 

2. Select the right-fit business account

While a dedicated business banking account allows you to manage and plan your business’s cash flow in a more organised manner, it’s essential to select one that can meet your needs. For instance, a business account such as the Business Multi-Currency Account provides preferential rates on your day-to-day payments while also giving you the opportunity to apply for credit facilities such as business loans, business credit cards, and trade financing. 

When choosing a right-fit business account, consider one that allows you maximise the value of your cash while making your day-to-day operations hassle-free. DBS IDEAL gives you all-in-one access to all your account and transaction services so that you can manage your small business cash flow with ease. Get a comprehensive overview of your working capital, payroll, account transactions, FX and more on a single screen, whether you are on your PC, tablet, or mobile phone. 

3. Identify risk and consider refinancing earlier rather than later

One of the best strategies to deal with cash flow challenges is to be proactive. This extends to  identifying business risks early and preparing in advance, and being on the front foot with applying for finance; for example, opting for a business loan to bolster your working capital rather than paying cash outright. This will help when dealing with scenarios such as suppliers increasing prices of their goods without warning, or equipment suddenly breaking down and needing to be repaired or replaced.

In such situations, a trusted banking partner can also actively help to manage your risk with a range of business financing solutions. As part of ongoing risk management, DBS monitors accounts closely using AI/ML models to assess risk and pre-emptively approach clients to discuss possible re-financing solutions.

4. Make receivables and collections more seamless and instant

Making it easier and faster for your customers and partners to pay you helps maintain the flow of money into the business. Whether it is domestic collections or cross-border fund transfers, expanding the number of payment options available and digitising the payments process for your customers can go a long way to ensuring faster, more transparent and more efficient collections to ease your cash flow. 

From your POS terminal and ordering kiosk to e-commerce sites and mobile apps, consider using solutions such as DBS MAX to allow customers to pay you via credit card, PayNow or PayLah! DBS RAPID can also seamlessly integrate direct debit authorisations and real-time payments and collections directly into your client platforms, for better user experiences - and more streamlined cash flow management and accounts reconciliation for you. 

Let DBS digibanking solutions help you with cash flow management for your small business

With DBS digibanking solutions, your day-to-day operations are made easier so you can focus on what really matters: growing your business. Our business financing and cash flow management tools are here to give you all the resources you need to optimise, expand and step up your business. 

Ready to improve your cash flow? Visit www.dbs.com.sg/sme/digibanking to learn more about our SME digital banking services, log into DBS IDEAL, or reach out to ChatBot Joy for more cash flow management solutions