Cash is king – or, more accurately, if you’re a small business, cash flow is essential to keep your company in business. Managing the flow of cash in and out of your business can literally make or break its future.

Yet cash flow management is mired in mystery for many small business owners (SBOs). If you fail to track and record the bills you pay, or are less than prompt about invoicing customers, you could probably benefit from a review of the practices you use to control cash flow.

Cash flow management can be broken down to two areas of concern: cash in and cash out.

Cash in

You can provide a great service or outstanding product, but if you can’t get your customers to pay you – in full and quickly – your small business is almost certainly doomed to fail. With many small businesses facing escalating expenses, keeping money flowing in a steady stream is essential.

There are several tactics you can use to encourage customers to pay quickly, and to limit your exposure to those who are habitually slow to pay.

* Consider offering nominal discounts for prompt payment. If your invoices are due in 30 days, sweeten the attraction of paying promptly by offering a 5 percent or 10 percent discount for payment in 10 days.

* Monitor your clients’ use of credit. If a few of your customers have a sketchy credit history, you may want to keep a tight rein on how much credit you extend to them.

* Consider requiring deposits for work in progress. This is especially helpful if the project will require you to put out some money – for supplies, extra staff, etc. – in order to complete it.

One of the most effective ways you can keep cash flowing into your business is to make it easy and fast for customers to pay you by offering a variety of payment options, such as credit card, eCheck, debit card and acceptance methods including online, in-person and over the phone. A 2010 study by Javelin research indicates that seven out of 10 American households already pay bills online. With online payment gaining in popularity, it makes sense for SBOs to offer this option to their customers. Offering multiple payment options can also influence customers to pay faster.

Accepting online payments doesn’t have to be complex. Services like American Express’ AcceptPay, an online payment acceptance tool, allow SBOs to offer customers various acceptance methods, including online, on phone and in-person. Credit card, eCheck (ACH) and debit card payments can be directly deposited into the company’s account, shortening lag times between when a customer pays and when the cash actually arrives in a small business’ account. What’s more, standard and custom reports provide a complete view of funds. And tools like automated payment reminders to customers, or automated recur billing, make it easy to gently keep customers on time and on track with their payments.

Cash out

Speeding the flow of cash into your business is only half the story. You also want to slow the flow of cash out. There are several ways to do this, but remember, you will often be dealing with other small businesses, which will see the benefit of offering incentives for you to pay your own bills quickly.

* Check with suppliers on their credit terms. If a supplier or vendor will offer you a discount for paying before the bill due date, it might be worth it to pay a bill early. Or, if a supplier offers 60 days same as cash, it may make sense to delay paying an invoice in full.

* Consider renegotiating key contracts. The recession has inspired many businesses to be more flexible in their dealings with each other. If you have service contracts – or even a building lease – you may be able to negotiate more favorable terms if the other party is feeling the pinch of the recession and wants to keep your business.