How to Improve Cash Flow: 5 Proven Strategies for Businesses

Owning a business is challenging in the best of circumstances. Trying to do it with poor cash flow can be overwhelming. According to SCORE, 82% of small business failures are due to poor cash flow management.¹ Preventing that from happening should be your top concern.

This article will present five proven strategies to help improve cash flow.

Some key takeaways:

• Increasing revenue streams will immediately improve cash flow, but your costs may also increase while you’re doing it.
• Higher net cash flow can be achieved by increasing revenue, but simultaneously reducing unnecessary expenses will get you there faster.
• Better invoice management can improve cash flow. Electronic invoicing can reduce payment times by up to 80% compared to paper invoices.

How to Improve Cash Flow: Top Strategies

Cash flow is the money coming in and out of a business. If you cover costs and expenses and still have cash left over, your cash flow is positive. Failing to cover costs and expenses puts you in the negative. These two states are often described as “in the black” for positive numbers and “in the red” for negative cash flow. Here are a few ways to improve it:

1. Increase Revenue Streams

This is an easy answer, but execution can be difficult. Increasing revenue streams will immediately improve cash flow, but your costs may also increase while you’re doing it. What you’re looking for is an improvement to your net cash flow. Raising prices is one way to accomplish that. You could also try the following:

• Upselling and cross-selling: Your customers are your greatest resource. Upselling them each time they make a purchase or cross-selling them related products and services is a good way to increase cash flow. Review their purchase history for information that can tell you what they are likely to buy.

• Expanding product or service offerings: Cross-selling is getting customers interested in other products or services you currently offer. Expanding your offerings gives you more options to generate revenue. Ideally, you’ll want to expand with low-cost items that have a high profit margin. Developing a new product line can be costly.

2. Reduce Unnecessary Expenses

The cash outflow portion of the cash flow equation is just as important as the cash inflow side of the ledger. Higher net cash flow is the objective. You achieve that by increasing revenue, but simultaneously reducing unnecessary expenses will get you there faster. This is particularly important during growth periods when the company is spending more money.

• Identify and cut wasteful spending: Cost-cutting typically focuses on eliminating “non-essential” expenses. Looking at wasteful spending takes that to another level. This could include equipment that’s underutilized, old subscriptions, or order quantities that should be modified. Your company could save significant money by removing these.

• Renegotiating contracts and supplier agreements: Vendors and suppliers face the same financial challenges your company does. That makes them more likely to accept changes to agreements if they improve their cash flow. One effective approach is to offer faster payment in exchange for a discount.

3. Improve Invoice Management

Invoice processing can be costly for two reasons. The first is the financial cost of the software and processing fees. The second is a time and opportunity cost. Accounts receivable inflows must be in sync with accounts payable outflows. Delays or disruptions on either side will create cash flow problems. This can be addressed through invoice management.

• Use invoicing software for faster payments: Electronic invoicing can reduce payment times by up to 80% compared to paper invoices. You can use them to automatically send reminders, offer different payment options, and provide real-time tracking of payment status. Most invoicing software also integrates with accounting tools.

• Set clear payment terms: The payment terms on your invoices are one of your best tools for controlling cash flow. They should be clear and concise, with penalties and incentives stated where the recipient can easily see them. It’s also a good idea to discuss those terms with buyers or suppliers in advance to avoid confusion.

• Set up international invoices to improve cash flow: You’ll need some help with this. Doing business internationally requires currency conversion. Wise Business can give you local account details in multiple currencies so customers can pay you like a local business, no matter where they're based. You can use the free Wise invoicing tool to create professional invoices and get paid with ease.

4. Implement Better Inventory Management Practices

Product-based businesses have a different cash flow challenge. Unsold inventory creates a backlog in cash inflows and outflows to vendors, suppliers, and operational activities. This can halt your momentum and damage your credit rating and reputation in your industry. It’s an area that could be addressed in several ways, including the following:

• Reduce overstock and dead inventory: It’s often better to write off inventory as a loss than to hope for a shift in consumer demand. You can reduce overstock by implementing an ABC inventory system to categorize products by sales volume. Focus on high-value items (A products) first and liquidate slow-moving products at a discount.

• Try 'just-in-time inventory' practices: This requires some negotiation with vendors and suppliers. You can reduce inventory costs by taking product deliveries as needed instead of stockpiling them. Toyota adopted this method and reduced its inventory costs by 30% without sacrificing production efficiency.²

5. Consider Financing Options

Cash flow is the lifeblood of the business. Without it, you won’t survive, so it may seem like everything is on the table. That includes outside financing if your company can take on new debt. Weigh the pros and cons carefully. Financing comes in many forms, including:

• Short-term business loans and lines of credit: Applying for a business loan from the bank is the most traditional option, but it’s not the only way to acquire funds. Small businesses often opt for a business line of credit because it’s more flexible and replenishable if you need to use it again.

• Invoice factoring and business grants: Invoice factoring is selling your invoices to a third party in exchange for a percentage of their value. This is a good way to generate immediate cash flow, but it could cost you 10% or more. Business grants, on the other hand, don’t require repayment. They’re a much better option if you can get them.

Common Causes of Cash Flow Problems

It’s difficult to figure out how to improve business cash flow if you don’t know what caused the problem in the first place. Being in this position doesn’t mean the business has failed. The solution could be simple if you understand what’s going on. Common causes include:

• Long payment terms: Offering net-60 payment terms when your vendors and suppliers only give net-30 is not a successful business model.
• Seasonal fluctuations: Retailers understand this all too well. Seasonal changes are one reason new businesses fail in their first year.
• Rapid growth: Growing too fast can cause cash flow problems, especially if demand exceeds supply. Outside financing may be required in this scenario.
• Tax surprises: Small businesses sometimes underestimate their quarterly tax payments. That can lead to a cash flow problem when taxes are due.

Monitoring and Maintaining Healthy Cash Flow

It’s impossible to solve a problem that you’re not aware of. Proactive monitoring prevents problems before they start. Implement these practices to stay prepared:

• Regular cash flow analysis: Cash flow analysis should be done monthly. Compare it to projections and make adjustments when needed.
• Using cash flow forecasting tools: Hope for the best, but prepare for the worst. Cash flow forecasting tools can predict when you might need additional capital.
• Tools that help track cash flow: QuickBooks, Xero, and other platforms have cash flow tracking tools that can alert you to issues in real time.

Why is it Important to Improve Cash Flow for Your Business?

Profit exists on paper, but cash flow is the actual money moving in and out of your accounts. Improving that flow provides your small business with the following benefits:

• Operational stability to pay bills and employees without stress
• Agility to seize opportunities when they arise
• Resilience against market downturns or unexpected expenses
• Leverage when negotiating with vendors or financial institutions

For a deeper understanding of cash flow fundamentals, read more about what cash flow is and how it works.

The Easy Way to Manage Business Finances Across Borders

International businesses face unique cash flow challenges, from currency fluctuations to payment delays. This is where a Wise Business account can help.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in 40+ currencies. You can get major currency account details for a one-off fee to receive overseas payments like a local. You can also send money to 140+ countries.

You can also take steps to mitigate cash flow problems caused by exchange rates by setting up rate alerts. This handy feature helps businesses exchange currencies when the rate is favorable.

Open a Wise Business account online

Stop letting international banking complexities drain your cash flow. Try Wise Business today.

	Editor & Business Expert:
	Panna is an expert in US business finance, covering topics from invoicing to international expansion. She creates guides and reviews to help businesses save time and make informed decisions. You can read more useful business articles on her author profile.

	Author:
	Kevin D. Flynn is a retired financial professional, business coach, and financial writer. He lives in Leominster, Massachusetts with his wife Evelyn, two cats, and ten wonderful grandchildren. When he’s not working, you’ll find him at the golf course or on his back porch reading classic sci-fi novels.

Sources:

1. The #1 Reason Small Businesses Fail - And How to Avoid It | SCORE
2. How does just-in-time production work? - Toyota UK Magazine
   All sources checked September 2025.