Cash Flow Management
for Maryland Small Business

Profit isn't cash. Repeat that.

You can have a profitable P&L and zero in the bank. Happens constantly. A few common ways:

• Customer hasn't paid yet (your invoice is "revenue" on the income statement, but the dollars aren't in the bank).
• You bought $40K of inventory (cash out, but it's an asset, not an expense — so the P&L looks fine).
• You took a $20K personal distribution (drops your bank balance but isn't an expense).
• You owe a quarterly estimated tax payment that hasn't hit yet.

The lesson: cash flow management is about timing, not about whether the business is fundamentally healthy. Even a great business can run out of money during a temporary gap. Even a bad business can survive a long time with disciplined cash management.

The three things to track

• Cash on hand — your current bank balance, minus checks/payments you've authorized but that haven't cleared.
• Cash flow — money in minus money out over a period. Operating cash flow, financing cash flow, investing cash flow.
• Cash runway — how many months you can keep operating at your current burn rate if revenue stopped today.

If you check nothing else weekly, check these three. Set a recurring 15-minute block.

The 13-week cash flow forecast

Quarterly P&L is for your accountant. 13-week cash flow is the small-business CFO's most-used tool. Build it once in a spreadsheet and update it weekly.

Structure:

• Columns: 13 weeks across the top, dated by Monday.
• Top section — Cash inflows: Expected customer payments (by client and expected pay date), loans/financing, owner contributions, tax refunds.
• Middle section — Cash outflows: Payroll (every other Friday), rent (1st), software (recurring monthly), vendor payments, estimated tax payments (4/15, 6/15, 9/15, 1/15), sales tax remittances, owner distributions.
• Bottom row — Cash position: Starting cash + net flow = ending cash. The ending cash of one week becomes the starting cash of the next.

This forecast surfaces the moments you'll have a problem — usually weeks 4 through 8, when a tax payment, payroll, and a slow-paying customer all collide. You can act on a known problem 6 weeks out. You can't act on a surprise.

Accounts receivable discipline

"My clients pay slow" is rarely true in absolute terms. Usually it's true relative to your discipline. Five things to tighten:

1. Invoice immediately

Don't wait until end of month. Net 30 starts the day you invoice. A four-day lag on invoicing is a four-day lag on cash. Make invoicing the last step of delivering work, not a separate task.

2. Make payment easy

QuickBooks Online, Stripe, or Square invoices with a one-click pay link. Friction kills payment timing more than client intent. ACH is cheap (often free or under 1%) and faster than checks.

3. Set net terms and stick to them

Net 30 is standard. Net 15 is fine for new clients. Net 60+ should be the exception, not the rule. Put the terms in the contract, on every invoice, and in the payment reminder.

4. Follow up consistently

Day 7 past due: friendly nudge ("just confirming you got this"). Day 14: more direct ("can you confirm the payment date?"). Day 30: phone call to AP. Day 45: stop work. Day 60: collections decision. Have the cadence written down so you don't have to think about it — automate the first two through your invoicing tool.

5. Demand deposits for new work

For new clients or large projects, 25–50% deposit at signing is reasonable. For ongoing service work, monthly retainers paid in advance solve most cash flow problems. Net-30 invoicing after delivery is the version with the worst cash characteristics — reserve it for clients who've earned the trust.

Accounts payable discipline

The flip side of AR. You're not trying to pay late — that destroys vendor relationships. You're trying to time payments so they coincide with cash inflows.

• Pay on the due date, not the day you receive the invoice. The float matters more than you think.
• Use Bill.com or QuickBooks Bill Pay to schedule payments. Cleaner records and you can see commitments in advance.
• Negotiate net 45 or net 60 with key vendors once you've built history with them. Don't ask in the first week.
• Take early-pay discounts if the math works. A 2%/10 net 30 (2% off if you pay in 10 days vs full in 30) is an annualized ~37% return — almost always worth taking if you have the cash.

Maryland-specific cash flow events to plan around

• April 15: Maryland SDAT $300 annual report fee + personal property return. Federal income tax + first quarter estimated tax. Maryland income tax. Easily a $5K–$15K cash hit for a small business in one week.
• June 15, September 15, January 15: Quarterly estimated tax payments (federal + MD).
• End of each month: Sales & use tax remittance (if applicable), due by the 20th of the following month.
• April 30, July 31, October 31, January 31: MD UI tax quarterly filings (if you have employees).
• January 31: W-2s, 1099-NECs, MW508 reconciliation — usually paid via payroll provider but cash impact is real if you owe.

Build these into your 13-week cash flow forecast. They're the #1 source of "surprise" cash hits for Maryland small businesses.

Cash reserves: how much, where

The classic guidance is 3–6 months of operating expenses in a business savings account, separate from your operating account. For most Maryland small businesses, here's the realistic version:

• Minimum — 1 month operating expenses always in the operating account. Anything below this means a single bad week can break payroll.
• Target — 3 months expenses in a separate savings or money-market account. Money-market funds at brokerages (Vanguard, Fidelity, Schwab) typically yield more than commercial savings accounts — 4–5% in recent years.
• Stretch — 6 months expenses if you have seasonality or customer concentration. If 30% of your revenue comes from one client, you need a bigger cushion than a business with 100 small clients.

Lines of credit: cheap insurance

Apply for a small business line of credit before you need it. Banks underwrite based on history — when you're stable and profitable. They don't lend when you're scrambling. Even an unused $25K LOC at a Maryland community bank is cheap insurance against a 30-day cash gap.

Be intentional. Lines of credit aren't a substitute for solving structural cash flow problems — they're for short-term timing gaps. If you're drawing on the LOC every month, you have a pricing or AR problem, not a financing problem.

Owner pay and distributions

How you pay yourself affects cash flow more than people realize.

• LLC / Sole Prop: Owner draws are unscheduled by default. The discipline trick: pay yourself on a fixed schedule (e.g., the 15th of each month, fixed amount), like a salary — even though it's a draw, not payroll. Keeps you from accidentally over-distributing during a flush month.
• S-Corp election: You're required to pay yourself a reasonable W-2 salary, plus you can take distributions on top. Set the salary based on what you'd pay someone else to do your job. Distribute only what's truly excess after taxes are set aside.

Always set aside taxes. 25–30% of net income for federal + MD is a reasonable estimate for most small businesses. Move it to a separate tax-reserve account monthly so it's gone when you look at "available cash".

Three early warning signs

If any of these are true, you have a cash flow problem to solve before it becomes a crisis:

1. You're funding payroll from receivables you don't actually have yet. "I'll cover it once the X invoice pays" is fine once or twice; it's a structural problem if it's the monthly pattern.
2. You can't tell me today what your cash balance is, without checking. If you're not looking at it weekly, you're already behind.
3. You haven't set aside money for taxes since your last quarterly. The IRS doesn't care that the cash isn't there — they care that the payment is.

The 30-day setup

If you're starting from "I don't really track cash," here's the four-week sprint to get to operational discipline:

• Week 1: Open a separate savings account for tax reserves. Set up automatic transfer of 25% of every customer payment.
• Week 2: Build the 13-week cash flow forecast in Excel or Google Sheets. Use the column structure above.
• Week 3: Apply for a line of credit at a Maryland community bank, even a small one.
• Week 4: Set a recurring 15-minute weekly block to update the forecast and check cash position. Pick a day; do it religiously.

This guide is educational. It is not financial, tax, or investment advice. Tax rates, filing deadlines, and program details change — confirm specifics with your Maryland CPA before relying on them.