QuickBooks Tips

7 Tips for Managing Cash Flow in QuickBooks Online

Cash flow and profitability are distinct indicators of a business’s financial health. Profitability refers to the revenue remaining after expenses are deducted. Cash flow, on the other hand, reflects how money moves into and out of the business. Cash flow affects liquidity — the ability to meet short-term financial obligations. For example, a profitable business may struggle to pay its bills if funds are tied up in unsold inventory or unpaid customer invoices.

QuickBooks Online offers several tools to help you monitor and manage cash flow. Reviewing cash flow alongside your profit and loss reports can provide a more complete picture of your business’s financial position and help identify potential cash shortages. Here are seven ways to manage your cash flow more effectively.

1. Review Account Balances

QuickBooks Online can import transactions from a credit card and other bank accounts. Knowing your current balances may not tell you how much money is available to pay expenses, but it’s still important. Review your cleared transactions regularly and confirm they’re categorized correctly so your reports accurately reflect your financial position.

Also, reconcile your accounts at least monthly. This process can find transactions that are missing, duplicated or have otherwise been recorded incorrectly. Errors can distort your cash flow reports.

2. Encourage Timely Payments

Sending an invoice promptly doesn’t guarantee timely payment, but there are ways to encourage faster payment. These include sending reminders, offering discounts for early payments and assessing finance charges on late payments. QuickBooks Online offers tools to help automate the process.

The software also offers two Accounts Receivable reports (summary and detail) that can show, in one view, who’s late with payments and by how much. Click Reports in the toolbar, then Standard reports | Who owes you.

3. Monitor Upcoming Bills

Review your pending bills to identify approaching due dates and determine whether you’ll have sufficient funds to meet your obligations. QuickBooks Online provides several ways to find this information.

Click All apps in the toolbar, then Expenses & Bills | Bills. Here, you can see the status of your bills: For review, Unpaid, Paid, and Recurring. You can also go to the Accounts payable aging summary or detail report (located under What you owe in the Standard reports list).

4. Consult the Profit and Loss Report

Cash flow and profitability are distinct, but reviewing your Profit and Loss report (under Reports | Business overview) alongside your accounts receivable, accounts payable and bank balances can provide a more complete picture of your business’s financial health.

5. Identify Unnecessary Expenses

As with bills, review your expenses regularly (Home | Expenses & Pay Bills | Expense transactions). Look for unexpected cost increases, unused subscriptions, unnecessary fees and small costs that add up.

Some expenses, such as office rent and utilities, may be essential, but reducing unnecessary costs can improve cash flow.

6. Explore Cash Flow Tools and Reports

QuickBooks Online offers two cash flow tools: the Cash flow overview and the Cash flow planner (hover your mouse over Reports, then click Financial planning). Another report, the Statement of Cash Flows, is under Reports | Business overview. Assistance is available if you need help creating, customizing and analyzing this report.

7. Establish a Weekly Routine

Regular cash flow monitoring is important. Set aside time each week to review your bank transactions, outstanding invoices, upcoming bills and cash balances. QuickBooks Online provides tools and information to help you evaluate where your cash is coming from, where it’s going and whether sufficient funds will be available when needed. Contact the office for assistance analyzing your cash flow and using QuickBooks Online to support your financial decisions.

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