June 19, 2025 · Accounting and Bookkeeping

Keeping Your Business and Personal Cash Flow Steady in 5 Simple Ways

An image of a small business owner in Mississauga who is reviewing their cash flow

The importance of positive cash flow is perhaps one of the most understated concepts in business. While all business owners recognize the importance of maintaining steady and smooth cash flow, many struggle to put it into practice.

And it’s not just business. Maintaining cash reserves and cash in hand in your finances is also extremely important. But how does one keep a steady cash flow? Especially small businesses which have innumerable cash transactions happening daily.

5 Common Solutions to Cash Flow Problems

We’re here with five ways you can put into practice right away to drive away your personal and business cash flow woes. 

Spending Sparingly

The basic thumb rule to improve cash flows is to understand and appreciate the difference between “needs” and “wants”. Do you need that new gaming console in your room, or is it just a strong desire to own one? Does your small business currently require such extensive office space, or are you purchasing it for an unforeseen future when your business expands? Both these instances highlight “wants”, not “needs”.

What your small business needs is a new machine or a machine upgrade that will help you churn out more products in a cost-effective and time-efficient manner. While optimism is suitable for an entrepreneur, unnecessary spending right at the beginning of your entrepreneurial journey can spell disaster for your business in the long term.

Instead, spending sensibly and sparingly helps maintain a healthy cash flow, which is essential for managing overhead and operating costs in a small business. If your company is up and running already, you can cut down on costs by maybe shifting to a small and cheaper office area or shifting your account to a bank with less monthly costs and even limiting the use of your company vehicle (and thus spending less on fuel), if it cannot be given up entirely. The same goes for your personal life – don’t overspend on things you don’t need at the moment.

Building a Cash Reserve

Where does all that money you saved in Step 1 go?

Into a cash reserve.

A cash reserve is like an emergency stash, only to be used when all other financial resources fail to meet your needs. A medical emergency, the sudden need to buy items over the counter at the local store, or even buying a hot dog when you’re starving, needs cash. Similarly, a sudden rise in demand and increased inventory pressures might call for excess cash reserves.

Building a healthy cash reserve from business profits is a great idea when the business is doing great. That way, you can be ready to meet any business needs during a downturn without having to dip into your personal money.

Generating Passive Income

Whether personal or business, an alternate source of income is welcome, right? Saving money in your bank account is a good habit. But what’s better is putting that money to work to generate more money! That is precisely what investing does.

Instead of relying on the meagre interest you get from your bank, investing in diversified assets such as real estate, stocks, and even other promising businesses can earn you better returns and generate a passive source of income. Diversification is vital to balance out any risks: if one investment takes a hit, another might offset it with a profit.

Regularly Monitoring Cash Flow

It might seem like common sense, but we often ignore this crucial step in the busy routine of our lives. Remember, the first signs of an impending problem in your business are usually reflected in your cash flow. Unusual volatility in the cash flow could be a signal that you are spending too much or are receiving too little money too late from your clients.

You can follow the money trail – from invoicing, accounts receivable, inventory, and accounts payable- to get to the bottom of the problem and resolve the issue. Similarly, failing to monitor your cash flow can result in a significant drain on your personal finances in the long run.

Staying Debt-Free

Lending and borrowing excessively, be it from friends or business lenders, can negatively impact your cash flow. The higher the amount of debt you accumulate, the more pressure is exerted on your cash flow in paying the interest. Alternatively, lending too much money to others also eats into your cash flow if you do not receive it back in the stipulated period.

Hence, lend only the amount you don’t need for a long time. And use borrowing as the last resort when your cash reserve is alarmingly low.

What Extra Can Small Business Owners Do to Improve Business Cash Flow?

While these solutions are equally effective in both personal and business cash flows, there are some other things you can do to make your small business cash flow smoother:

  • Respectfully insisting on timely payments from clients through an effective invoicing system. You can even offer incentives such as prompt payment discounts.
  • Carefully plan any payments or bills to be cleared to avoid all cash outflow at the same time.
  • Regularly checking inventory helps prevent tying up cash in surplus stock and storage costs. However, you should carefully balance the risk of missed sales opportunities due to inadequate stock.
  • Analyzing and reviewing your product pricing to optimize sales, profitability, and boost cash flow.

Improving cash flow will always remain a work in progress, but getting it right from the beginning is better than having to improve it later.

Contact Glenn Graydon Wright LLP in Oakville To Improve and Manage Your Cash Flow

A bookkeeper and accountant can aid you in chalking out a robust blueprint to keep your cash flow steady and smooth in the long run. They can also advise you on the best technology and systems to use for optimizing your financial resources and operations, thereby protecting your cash flow. At Glenn Graydon Wright LLP, our accountants and bookkeepers provide services such as setting up and monitoring the cash flow system, as well as offering recommendations on how to improve it. To learn more about how Glenn Graydon Wright LLP can provide you with the accounting expertise you need, contact us at 905-845-6633 or connect with us online to schedule an initial consultation.