Looking at cash flow data


Cash flow management tips for small businesses

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The most successful small businesses know their cash flow position and cycles while those that don’t often run into cash flow problems, which puts them at risk of failing or suffering financial hardship.

Cash flow allows business to be able pay their immediate expenses such as, wages, superannuation, PAYGW, bank and equipment loans and overheads necessary to keep their business up and running. Below are tips to stay on top of and monitor your cash flow to secure your business’ future.

Perform a business health check

Preparing financial statements will give you an objective insight into the health of your business. Although it is retrospective it allows you to identify the profitability of your business and highlight your overheads for the past twelve months.

Now with real time data in cloud software, cashflow should be easier than ever to control, the following are reports that will allow you to see where your cash flow is up to:

  • A balance sheet will highlight to you what your current assets & liabilities are. Current assets highlight your expected income to be received in the next twelve months and current liabilities are what you will be required to pay over the same period.

  • Profit loss statements reveal if your income is meeting your expense requirements. If you are operating at a loss it is time for a change. Note there are some noncash items that you will need to consider, such as depreciation.

  • Cash flow reports reveal the money that is going in and out of your business over a set period and identify peak and off-peak periods.

Prepare a cash flow budget

After analysing your cash flow situation, is your cash flow cyclical?

Creating a monthly budget will help to identify when your large payments are due, such as interest, repayments, BAS payments, and planned capital purchases. It will also highlight your busiest months for sales. Having a clear budget will allow you and interested parties such as your bank and accountants to understand your business and how it operates.

Where applicable, business owners can consider flexible rostering, whereby employing casuals and using a flexible roster can help you cut back on hours when you need to improve your cash flow in quiet periods.

When you have identified your quieter periods of the year, try to find additional revenue streams for when cash is low. Is there a product or service that could be introduced? Work with your team for new ideas to cover low cash months.

If you simply complete your budget and file it to look at next year, there was no point putting the time and energy into it. It is worthwhile revisiting the budget, at least quarterly, to compare your actual income and expenses against your budgeted numbers which is easier than ever with the power of live data. This will allow you to plan for the coming months. It will also put you in the best position to expand, if that is your goal, as you will be able to show your numbers to the bank for a loan.

Read more about “Better Budgeting For Rising Cost and Inflation“.

Get on top of your accounts receivable and accounts payables

The biggest hurdle for small business is getting customers to pay on time. Allowing late repayments reduces your cash flow and can put you in a tight financial spot. Avoid being out of pocket by implementing some of these credit policies:

  • Collect debts on time. You can now email and set up reminders through the cloud software, making it easier than ever to remind outstanding customers
  • Offer an early bird discount to incentivise early repayments
  • Set credit limits and payment terms
  • Make credit applications and carry out credit checks on all new customers
  • Penalise late payments with interest
  • Consider cutting down on inventory
  • Request upfront payment or a non- refundable deposit where viable, especially when dealing with large orders
  • Take full advantage of creditor payments. If a payment is due, pay as late as possible.
  • Do any of your suppliers offer early bird discounts? On-time discounts, if you have the cash, are a great way to reduce your expenses
  • Don’t always focus on the lowest price. Relationships with suppliers could be worth more, they may offer flexible payment terms if you run into cash flow issues.

Follow the tips and make sure you are one of the successful businesses by knowing your cash flow position and cycles. If you need any help with cashflow advice for your business, then contact our business advisers.


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