Cash Flow Management: A Survival Guide for Micro Entrepreneurs

Cash flow — the movement of money in and out of your business — is the lifeblood of any enterprise. Many small businesses that are profitable on paper fail because they run out of cash at the wrong time. Here is how to manage your cash flow effectively.

Understand the Difference Between Profit and Cash Flow

Profit is the money you make after expenses. Cash flow is the actual cash available in your business right now. A business can be profitable but still run out of cash if customers pay late or if you overspend on inventory.

Track Every Peso In and Out

Use a simple notebook, spreadsheet, or accounting app to record every peso that enters and leaves your business. Record sales, expenses, loan payments, and any other financial transactions daily.

Separate Personal and Business Money

Never mix your personal funds with your business funds. Open a separate bank account for your business and pay yourself a fixed salary from business profits.

Build a Cash Reserve

Aim to keep at least one to three months of operating expenses in a separate savings account. This "emergency fund" protects your business during slow seasons or unexpected events.

Invoice Promptly and Follow Up

If you offer credit to customers, send invoices immediately after delivering goods or services. Follow up on overdue payments politely but consistently.

Negotiate Better Payment Terms

Try to negotiate longer payment terms with your suppliers (e.g., pay in 30 days) while offering shorter payment terms to your customers (e.g., pay within 7 days). This improves your cash position.

Use Free Tools

Free apps like Wave Accounting, GCash Business, or even Google Sheets can help you track cash flow without spending money on expensive software.