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How to Properly Manage Your Business Cash Flow

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Cash flow is the lifeblood of any business. Regardless of how innovative your product is or how many sales you generate, if there’s not enough cash available to cover day-to-day expenses, your business could quickly find itself in trouble. Managing cash flow effectively ensures your company remains financially healthy and resilient during economic ups and downs. Here’s a comprehensive guide to help you properly manage your business cash flow.

1. Understand What Cash Flow Really Means
Cash flow refers to the movement of money in and out of your business. There are two types:

  • Positive Cash Flow: More money is coming in than going out.
  • Negative Cash Flow: More money is leaving than coming in.

While short-term negative cash flow may not be fatal, persistent issues can lead to insolvency. Understanding the timing and sources of cash inflows and outflows is critical.

2. Forecast Your Cash Flow
Creating a cash flow forecast helps anticipate future cash shortages and surpluses. This should be a rolling forecast, updated monthly (or even weekly) to reflect changes in the business environment.

Key components of a forecast include:

  • Projected income (sales, loans, investments)
  • Fixed and variable expenses (rent, utilities, payroll, inventory)
  • One-off expenses (equipment, marketing campaigns)

By forecasting ahead, you can spot potential issues and plan how to deal with them before they become serious problems.

3. Accelerate Receivables
Waiting too long to collect money can starve your business of needed cash. Implement strategies to speed up receivables:

  • Send invoices promptly
  • Offer early payment discounts
  • Use digital invoicing systems
  • Follow up on overdue payments quickly
  • Consider invoice factoring if needed

4. Manage Payables Wisely
While it’s tempting to pay every bill as soon as it arrives, good cash flow management means holding onto cash as long as it makes sense:

  • Take full advantage of supplier payment terms
  • Negotiate better terms when possible
  • Avoid late fees, which can damage supplier relationships

Be strategic: prioritize payments that affect operations (payroll, rent, key suppliers) and delay less critical expenses if needed.

5. Control Inventory Levels
Excess inventory ties up cash that could be used elsewhere. Use inventory management systems to track usage trends and optimize purchasing:

  • Implement just-in-time (JIT) inventory where feasible
  • Identify slow-moving stock and find ways to liquidate it
  • Work with suppliers on flexible ordering

6. Build a Cash Reserve
Having an emergency cash cushion can prevent panic during slow periods. Set aside a percentage of profits each month until you have 3–6 months of operating expenses saved.

7. Monitor and Analyze Cash Flow Regularly
Use accounting software or dashboards to monitor your cash flow in real time. Regularly analyze key metrics like:

  • Operating cash flow
  • Days sales outstanding (DSO)
  • Days payable outstanding (DPO)
  • Cash conversion cycle (CCC)

Reviewing this data will help you spot patterns and make better financial decisions.

8. Cut Unnecessary Costs
Lean operations often translate into stronger cash flow. Audit your expenses regularly:

  • Cancel unused subscriptions
  • Outsource non-core functions
  • Switch to cost-effective suppliers
  • Automate routine tasks to reduce labor costs

9. Secure Financing Before You Need It
If you foresee a future cash gap, explore financing options early while your financials are strong:

  • Business lines of credit
  • Short-term loans
  • Equity investment

Having financing in place can provide a buffer during lean periods without panic borrowing.

10. Educate Your Team
Cash flow isn’t just the finance department’s concern. Train department heads and team leaders on budgeting, purchasing, and financial responsibility. A company-wide culture of financial awareness leads to smarter spending decisions across the board.

Final Thoughts
Properly managing your business’s cash flow isn’t just about survival—it’s about building a strong foundation for sustainable growth. With proactive forecasting, tight control over receivables and payables, strategic spending, and continuous monitoring, your business will be better prepared to weather financial challenges and seize new opportunities.

Remember: Revenue is vanity, profit is sanity, but cash is king. Treat it that way.

Make Sure to Not Claim an Ineligible Dependent on Your Taxes

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Claiming dependents on your tax return can significantly reduce your tax liability through exemptions, deductions, and credits. However, claiming an ineligible dependent—whether accidentally or intentionally—can lead to serious consequences, including IRS penalties, delayed refunds, and even audits. Understanding the rules and repercussions is essential for responsible tax filing.

Who Qualifies as a Dependent?

Before diving into the risks of misclaiming, it’s important to understand the criteria the IRS uses to determine dependent eligibility. There are two main categories:

1. Qualifying Child

Must meet all of the following:

  • Relationship: Your child, stepchild, sibling, or descendant.
  • Age: Under 19, or under 24 if a full-time student (no age limit if permanently disabled).
  • Residency: Lived with you for more than half the year.
  • Support: Did not provide more than half of their own financial support.
  • Filing Status: Not filing a joint return (unless only to claim a refund).

2. Qualifying Relative

Must meet all of the following:

  • Not a qualifying child of another taxpayer.
  • Gross Income: Less than the IRS threshold (e.g., $4,700 in 2023).
  • Support: You provided more than half of their support during the year.
  • Relationship or residency: Related to you or lived with you all year.

Common Mistakes That Lead to Claiming Ineligible Dependents

  • Sharing custody: Divorced or separated parents may both try to claim the same child.
  • Adult children: Claiming a child who earned too much or provided most of their own support.
  • Extended family or roommates: Claiming individuals who don’t meet relationship or residency requirements.
  • Double claiming: Both taxpayers in a split household claim the same person.

Consequences of Claiming an Ineligible Dependent

Delayed or Rejected Refund

If the IRS detects a problem (especially if the dependent’s Social Security Number has already been used), your return may be flagged and your refund delayed or denied.

Amended Returns or Audits

You may be required to file an amended return and repay any credits or refunds you received in error. This can trigger an IRS audit, which may require documentation of eligibility.

Penalties and Interest

The IRS can impose penalties for negligence or fraud, along with interest on unpaid taxes.

Loss of Valuable Tax Credits

Claiming an ineligible dependent may incorrectly qualify you for:

  • Child Tax Credit (CTC)
  • Earned Income Tax Credit (EITC)
  • Dependent Care Credit
  • Head of Household status

If disallowed, you may lose eligibility for these credits for up to 10 years if the IRS deems the claim fraudulent.

What to Do If You’ve Made a Mistake

1. Don’t Ignore IRS Notices

If you receive a notice or letter from the IRS about your dependent claim, respond promptly with any requested documentation or corrections.

2. File an Amended Return

Use Form 1040-X to amend your return if you realize you’ve claimed someone who doesn’t qualify. This can reduce penalties if done proactively.

3. Seek Professional Help

A tax professional can help assess your situation and guide you through rectifying the mistake and dealing with the IRS.

Tips to Avoid Errors

  • Use tax preparation software with dependent eligibility checks.
  • Keep thorough records: proof of residency, school records, income, and support documents.
  • Coordinate with other household members or ex-spouses to avoid duplicate claims.

Final Thoughts

Claiming a dependent can offer significant tax benefits, but the rules are strict and must be followed carefully. If you’re unsure whether someone qualifies, it’s better to double-check than risk penalties or audits. When in doubt, consult a licensed tax professional or the IRS website for guidance.

3 Ways to Receive Payments in QuickBooks Online

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Got customer payments coming in? QuickBooks Online has multiple ways to accept and record them.

One of the biggest challenges small businesses face is managing a steady cash flow. Keeping income ahead of expenses is a constant balancing act. QuickBooks Online can help. With easy-to-use forms and a convenient mobile app, it helps you track and deposit incoming payments with ease.

Do you ever receive instant payments for certain products or services? Ever need to record a sale on the go—both for your records and your customer’s? Or maybe you send out invoices and want to ensure payments are accurately logged once they come in. QuickBooks Online has you covered in all these scenarios. Plus, it offers automation tools that speed up the payment process—so you can get paid faster and focus on growing your business.

Let Customers Pay Online

If your business sends invoices for products or services, QuickBooks Online makes it easy to record customer payments. While you can manually enter payments, there’s a faster, more efficient option: QuickBooks Payments. This built-in merchant service lets you accept credit card and bank payments electronically—helping you get paid quicker and streamlining your cash flow.

Once QuickBooks Payments is set up in QuickBooks Online (contact us if you need help), your invoices will include integrated payment options for credit cards and electronic checks. Each invoice will feature a payment button, allowing customers to easily enter their payment information. You’ll be able to track when an invoice is viewed, paid, and deposited. Simply open your list of invoices and click on one to view its details. A timeline panel will slide out from the right side, showing the invoice’s history and status. Plus, you can opt to receive notifications for invoice activity.

If you prefer to record payments manually, find the unpaid invoice in your list and click the Receive Payment link at the end of the row. This opens the Receive Payment screen, where you can fill in any missing details and save. You can also find the same link on the invoice screen itself or from the Invoices page (SalesInvoices).

You can receive payments manually in QuickBooks Online from an invoice itself or from the Invoices page.

There’s no cost for setting up a pay-as-you-go account in QuickBooks Payments. There are only per-transaction fees:

●     ACH bank payments are 1%.

●     It’s 3.5% if the payment comes in through an invoice (Apple Pay, Google Pay, credit cards, etc.) or if the payments are keyed in. 

●     If you swipe a card, you’ll pay 2.4%

There’s also a $0.30 fee per transaction. Transaction fees are slightly lower if you pay $20 per month. Payments that come in before 3 p.m. PT should be in your account the next business day. 

Accepting Payments Through GoPayment

To take payments while you’re on the road, you’ll need a free mobile card reader from Intuit that connects to your smartphone. It supports tap, chip, and digital wallet payments. You can also manually enter card details (see above rates). To process transactions, you’ll need to download the GoPayment app, available for iOS and Android. The app lets you add product names, prices, and images to make checkout faster and easier. Multiple layers of security are in place to help protect your data during mobile transactions.

Receiving Instant Payments

Sometimes, you’ll receive payment right after delivering a product or service. In these cases, QuickBooks Online allows you to create and provide a sales receipt on the spot. Just click +New in the upper left corner, then select Sales Receipt in the Customers section. The form that opens will look similar to an invoice or estimate. Choose the customer in the upper left corner, and fill out the remaining details as you normally would. When you’re finished, click Save and send to email the receipt. You’ll have the option to preview it before sending and to print it.

The Undeposited Funds Account

The Undeposited Funds account in the QuickBooks Online Chart of Accounts

If your customer paid you on the spot with a credit card, that payment would be processed in your QuickBooks Payments merchant center. But what about a physical check? QuickBooks Online defaults to the Undeposited Funds account for sales transactions. You can change this, but we don’t recommend it. This account temporarily holds payments—typically cash and checks—that haven’t yet been deposited into your bank. 

It’s a good idea to review this account regularly to ensure you’re not leaving funds languishing. Hover your mouse over the Transactions link in the toolbar and click Chart of Accounts. Scroll down until you find it, as pictured above. To combine the transactions in the Undeposited Funds account to make a bank deposit, click +New in the upper left corner and then click Bank deposit under Other. Make sure the Account in the upper left corner is set to the account where you want to deposit the funds. Click the box in front of each check you want to deposit (or Select all), then Save.

To see your deposit information, click Reports in the toolbar, then  click Deposit Detail under Sales and Customers. You’ll have to list the deposits individually on your physical deposit slip. Make sure that the slip matches what you see in QuickBooks Online. 

If you need help or have questions, feel free to contact us to schedule a consultation. While the process of receiving payments isn’t overly complicated, it’s essential to ensure every payment is recorded accurately and deposited correctly into your bank accounts.

Understanding Depreciation Deductions for Business Real Estate

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Depreciation is one of the most powerful tax advantages available to real estate owners. If you own commercial property or use real estate in your business, depreciation deductions can significantly reduce your taxable income over time. However, many business owners miss out on maximizing these benefits due to a lack of understanding.

Here’s a clear and practical guide to how depreciation works for business real estate and how you can use it to your financial advantage.

What Is Real Estate Depreciation?
Depreciation is the process of deducting the cost of a long-term asset over its useful life. For real estate, this means that instead of writing off the full cost of a building in the year it was purchased, you gradually deduct portions of its value each year.

Importantly, land itself does not depreciate—only the building and certain improvements do.

Depreciation Basics for Business Property

  • Depreciable assets: Buildings, structural components (roof, HVAC, plumbing), and certain improvements
  • Non-depreciable assets: Land, inventory, and personal residences
  • Depreciation method: The IRS requires the Modified Accelerated Cost Recovery System (MACRS)
  • Depreciation period:
    • Residential rental property: 27.5 years
    • Commercial property: 39 years

How to Calculate Depreciation
Let’s say you buy a commercial building for $1 million, with land valued at $200,000. Only the building portion ($800,000) is depreciable.

Annual depreciation deduction = $800,000 ÷ 39 = $20,513 per year

That’s over $20,000 per year in tax deductions—without spending another dime.

Requirements for Depreciation

To claim depreciation on a property:

  1. You must own the property (not lease it).
  2. You must use it for business or income-producing purposes.
  3. It must have a determinable useful life (expected to last more than a year).
  4. The property must be placed in service (available for use) before you can begin depreciation.

Improvements vs. Repairs

  • Repairs (e.g., fixing a leak) are usually fully deductible in the year incurred.
  • Improvements (e.g., replacing the roof or adding a new HVAC system) must be capitalized and depreciated over time.

Bonus Depreciation and Section 179

Although buildings themselves must be depreciated over decades, certain components or improvements may qualify for bonus depreciation or Section 179 expensing, allowing you to deduct more upfront.

  • Bonus Depreciation: Temporarily allows 100% immediate expensing of qualified improvements (dropping to 80% in 2023 and phasing out by 2027 under current law).
  • Section 179: Allows immediate expensing of certain improvements, such as roofs, HVACs, and alarm systems, up to a limit ($1.22 million in 2024, subject to phaseouts).

These tools can accelerate deductions and improve cash flow.

Cost Segregation: Supercharge Your Depreciation

A cost segregation study breaks your building into components (e.g., flooring, lighting, fixtures) that can be depreciated faster—over 5, 7, or 15 years instead of 39.

While the study involves a cost (usually performed by specialists), the tax savings can be substantial—especially for high-value properties.

What Happens When You Sell? Depreciation Recapture

Depreciation lowers your taxable income, but it can also increase your tax bill when you sell.

  • Depreciation recapture: When you sell the property, the IRS may “recapture” depreciation and tax it at a maximum rate of 25%.
  • That doesn’t mean depreciation isn’t worth it—far from it—but you should plan ahead with your accountant or tax advisor to manage the exit strategy.

Documentation and Compliance

To stay compliant:

  • Keep detailed records of the purchase price, improvement costs, and depreciation schedules.
  • Use IRS Form 4562 to report depreciation each year.
  • Consult a tax professional to ensure accuracy and to explore strategies like cost segregation and bonus depreciation.

Final Thoughts
Depreciation deductions can significantly lower your tax liability and free up cash for reinvestment in your business. By understanding how to apply these rules to your commercial real estate, you can build wealth more efficiently and strategically.

Remember: Real estate doesn’t just appreciate in value—it also helps you depreciate your tax burden.

The Many Types of Investment Risk

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It is important for investors to understand that every investment has its own set of risks. One key to successful investing is to recognize the different types of risks that could be a threat to one’s financial well-being and to take steps to minimize their impact. What follows is an overview of the primary forms of investment risk as well as some tips on how to minimize that risk.

Market Risk

This is the risk that the prices of securities may fall due to external factors such as world events, economic changes, or investors’ expectations and outlook. Stock investors are more likely to be impacted by this form of risk than fixed-income investors.

Inflation Risk

Also known as purchasing power risk, this is the risk that is connected to the uncertainty over the future purchasing power of the income and principal of an investment. When prices rise (inflation), purchasing power typically falls. Historically, stocks have been less impacted by this type of risk since they have been able to appreciate in price at a faster rate than the rate of inflation. Typically, lower yielding cash equivalents are more likely to be affected by a rise in inflation.

Interest Rate Risk

When interest rates move up and down, bond prices change. When interest rates move up, newly issued bonds will generally pay a higher interest rate than similar, older bonds. What happens next is that the market of existing bonds falls because there is less demand for them. In other words, they lose market value. The opposite happens when interest rates fall: Older, previously issued bonds will pay higher rates of interest than newly issued bonds, making the older bonds more appealing to investors. The bottom line is that falling interest rates are generally beneficial to bond owners.

Maturity Risk

Since it is impossible to predict how the financial markets will perform in the future, long-term bonds are generally considered to be riskier investments than short-term bonds. This type of risk is known as maturity risk. Issuers of long-term bonds attempt to compensate for the additional risk by offering higher yields.

Credit Risk

Credit risk is the risk that a bond issuer will be unable to pay interest on the bonds it issued or repay principal when the bonds mature. Rating services, such as Moody’s Investor Services and Standard & Poor’s, carefully investigate the financial health of a bond issuer in order to alert investors to the risks of a particular issue. The rating services rate municipal bonds, corporate bonds, and international bonds. They do not rate Treasury bonds since the assumption is that they are solid, backed by the full faith and credit of the federal government. The rating services rate bond quality according to a system that employs letters and numbers, with AAA or aaa indicating the highest quality issues and CCC or ccc and below indicating poor quality issues that could default.

Credit ratings influence the interest rate an issuer must pay in order to sell its bonds. However, credit ratings are opinions about credit risk. Even though credit ratings are forward looking in that they assess the impact of foreseeable future events and can be useful to investors, they are not a guarantee that an investment will pay out or that an issuer will not default.

Currency Risk

Changes in currency exchange rates will have an impact on returns from overseas investments. For example, when the dollar rises in value in relation to the Euro, the return on a fund that holds a large number of stocks in European businesses is reduced when the Euros are converted to U.S. dollars. The opposite occurs when the dollar falls in value in relation to the Euro.

All investments have risks. Before buying a security, understand that the key to investing success is balancing risk. You can do this by having a well-diversified portfolio and an asset allocation strategy based on your risk tolerance and the number of years until you retire.

Diversification helps you manage risk by spreading your assets among a broad mix of different investments. When you do this, you are taking advantage of the fact that securities usually don’t move in the same direction at the same time. When some investments drop in value, others may rise or remain unchanged, offsetting to some degree those investments that lose value. Of course, diversification does not ensure a profit or protect against loss in a declining market.

Be sure to talk to your financial professional for insights on how you can balance risk in your investment portfolio.

Is That Financial Aid Taxable?

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The college search process is an exciting but time-consuming process. After your child narrows down the colleges of his or her choice, you both have to figure out the issue of paying for tuition and room and board. The reality is that a four-year college education is expensive. The College Board1 reported that the average annual published tuition and fees for in-state students at a four-year public college was $11,260 for the 2023-2024 school year, $29,150 for out-of-state tuition and fees at a four-year public college, and $41,540 per year for a four-year private college. However, colleges typically offer scholarships or discounted tuition rates for students who are high achievers academically or distinguish themselves in sports, the arts, music, or other field. Grants and work-study programs can also help reduce the final price tag of a college education.

Student Aid Trends

In 2022-2023, undergraduate students received an average of $15,480 in financial aid, including grants ($10,680), federal loans ($3,860), education tax credits and deductions ($850), and federal work-study ($90).2

Financial Aid and Taxes

If your child is awarded financial aid for college expenses, you may be concerned that taxes will be due on that aid. As always with taxes, it depends on the circumstances. In general, gift aid, including scholarships and fellowship grants that are paid to an individual to assist in the pursuit of study or for research, is not taxable if:

  • The recipient is a degree candidate at an eligible educational institution – defined as one that has a faculty, a curriculum, and a regularly enrolled group of students.
  • The funds are either designated for tuition and related expenses – required fees, books, supplies, and equipment – or are unrestricted and the amount does not exceed tuition and related expenses. Expenses for room and board do not count.
  • The award is not payment for services such as teaching or research.

Excess aid is considered taxable income to the student. Nonetheless, a student’s standard deduction may be enough to shelter any earned income from income taxes.

Other Options for Parents

Saving for college through a Section 529 plan delivers valuable tax benefits. The money in a Section 529 plan grows on a tax-deferred basis, and 3 distributions for qualified educational expenses are free of federal income tax. Additionally, many states offer some form of state income tax deduction or credit for contributions to a 529 plan.

Work With a Professional

Deciding where to go to college is both an exciting and stressful decision for young people. Figuring out how to pay for it can cause parents many sleepless nights. That’s why it can be helpful to obtain the input of a financial professional well before your child makes his or her choice as to where to attend college. A financial professional may be able to offer unique insights and advice on how parents can afford college for their children.

1The College Board, “Trends in College Pricing and Student Aid 2023.”

2Figures are per full-time equivalent student.

3Certain benefits may not be available unless specific requirements (e.g., residency) are met. There also may be restrictions on the timing of distributions and how they may be used. Before investing, consider the investment objectives, risks, and charges and expenses associated with municipal fund securities. The issuer’s official statement contains more information about municipal fund securities, and you should read it carefully before investing.