If your cash flow forecast shows that you will have surplus cash balances available during certain periods of time, you may want to consider making short-term investments in marketable securities. If your business is consistently generating a cash surplus, you might consider longer-term and higher yield investments. It is probably advisable to maintain a certain level of cash on hand to cover any unforeseen circumstances, or to take advantage of prompt payment discounts, as mentioned above. But unless your bank is paying you interest, a large accumulated balance in your checking account is not at work for your business.
Meet your obligations and protect your credit rating
This may seem obvious, but it is fundamental in managing your finances. Paying on time not only protects your credit rating. It also allows you to maintain good relationships with your vendors and creditors, and builds your reputation as a solid business partner, thereby opening up new opportunities, since your current vendors will be able to give good references to other potential vendors. And, your payment record will be a primary consideration when it comes time to request additional financing for growth and expansion.
Communicate with creditors ahead of time when you find you may not be able to make a payment on time
If in spite of your best cash management efforts, you occasionally find yourself unable to make a payment when it becomes due, you should communicate with your vendor or creditor ahead of time. This gives them time to react and possibly grant you a concession in terms of a grace period or to work out other payment terms, rather than showing your account as delinquent and thus negatively affecting your credit score. Most vendors and creditors can be surprisingly cooperative if they are informed of the situation in advance. It shows your seriousness and your commitment to meeting your obligations.