Cash Management Strategies to Help Navigate Economic Uncertainty

With the market in an ongoing state of financial flux, business owners may need to take new approaches when it comes to managing money. Just as budgeting can support business goals under typical circumstances, establishing plans for challenging periods can help ensure successful outcomes. Financial decisions require thorough consideration before acting, but applying best practices and creative solutions can help businesses stay on track during the process. 

By reviewing options for cash management and identifying which can better position a business to meet its needs, owners and leaders can navigate unusual economic circumstances in a number of effective ways. For example, strategically paying expenses to even out cash flow and knowing when and where to invest are key components to a successful cash management plan. Making sure enough cash is invested, savings are set aside and cash is kept on hand to keep business running smoothly is a learned practice — and requires balance.

Protect the Business when Investing

Many business owners have strategically cut back on expenses and hit pause on hiring. When costs are on the rise, strengthening cash reserves may seem like the obvious choice — but liquidizing investments comes with risk. This is a gamble with the chance of selling prematurely and could end up with the business losing out on money when the market fluctuates again.

Rather than selling, business owners should consider a strategic shift into defensive investments that can hold up during economic instability. They can work with a team of financial advisors to ensure a balanced profile that allows the current investment plan to hold up during fluctuations. With proper planning and collaboration, businesses can stay the course during market instability and remain a long-term investor instead of trying to time the market. Mitigating risk in cash reserves can occur without taking on unnecessary risk in an investment strategy.

Take Advantage of Credit Card Programs

While organizational spending can be quickly addressed in shorter-term responses to economic challenges, payment accounts themselves can provide more specialized controls designed for ongoing management. Credit card features are a helpful tool that can help strategically manage money when costs are high. Here are a few potentially beneficial resources:

• Cash Control: A business credit card feature that can increase cash flow as credit card transactions are deferred to an account that offers credit terms and a grace period to make payments.
• Efficiency: Some financial institutions allow issuance of several card numbers under one account, with transactions posted to a central billing source. This time-saving feature allows business owners to easily pay off multiple employee credit card bills from a single account.
• Easy Account Management: Online tools can simplify business card account transactions. Business owners can manage employee cards, and easily issue and block cards to efficiently monitor business credit card transactions.
• Rewards: Banks may offer both point-based rewards programs and cash-back rebates. Points can be used to purchase merchandise, books, travel-related trips or cash-back in the form of a statement credit. Some financial institutions offer earnings credit rate (ECR) programs that can lower banking expenses by allowing owners to apply their various banking service fees from business credit cards, merchant services or business loans against treasury management to take a proactive stance against check fraud.

Even Out Your Cash Flow

Managing a business’s cash flow and planning for expenses is critical to sustaining a positive flow of income. Identifying opportunities to cut back on expenses can give a business flexibility during periods of higher prices and interest rates. As necessary expenses continue, timing payments intentionally can avoid strain or unexpected obstacles. The following are strategies to consider for handling payments:

• Evaluate supply and production costs to make sure there is enough return on investments.
• Avoid paying all bills at the same time and spread out expenses as much as possible to avoid running out of funds.
• Prioritize expenses to get an idea of what bills can be postponed or rescheduled in order to stagger payments.
• Consult with suppliers. When possible, work with suppliers who are flexible and willing to provide a payment plan that syncs with specific cash-flow needs.

Although some businesses may not have needed as many resources in past approaches to cash management, it is important to be aware of the many tools and strategies available during uncertain circumstances. Businesses can meet goals and adequately protect against risk by incorporating strategic cash management practices into upcoming plans.  

Brian Crisp is regional president for Arizona at Enterprise Bank & Trust. With more than 20 years of banking experience and close ties to the Phoenix business community, he oversees all aspects of the bank’s operations in the state and facilitates the bank’s growth in the region to meet existing and prospective clients’ expanding needs.