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5 ways to improve your cash flow

5 ways to improve your cash flow

5 Ways to Improve your Cash Flow

In our last blog, we discussed ways of managing your cash flow. We know that cash is the lifeblood of any business, so here are 5 more tips to help you improve your cash flow.

 If the cash dries up, problems quickly begin to multiply. By keeping the cash running freely and you can continue to grow your business.

Here are five tips for improving your cash flow:

1. Have a system to manage your debtors. 

Come up with a clear, step-by-step way to handle outstanding accounts. This might include:

  • automated reminders on unpaid emails
  • a phone call or email when the amount has been outstanding for a certain period of time
  • a stop credit on the client when they exceed an acceptable payment time.
2. Be prepared for tax time 

One of the fastest ways to run out of cash is to find yourself short at tax time. Talk to your accountant about tax planning measures you can implement to ensure you can make your compliance and tax obligations. 

3. Try not to dip into business funds for personal spending

It’s always tempting to tap your business account for personal spending. Instead, try to keep them separate. If you’ve over-saved at the end of the tax year, you may be able to draw down a nice bonus. That’s much better than being caught short.

4. Sell old stock

Too much stock? Consider old stock, old furniture, machinery or even stationery: they can all be sold to free up space and provide a small cash injection.

5. Forecast your cash flow

Create a cash flow forecast (we can do this with you) and that will help you monitor and measure the flow of cash in and out of the business.

Need help with forecasting or cash flow management? We’re here for you. Feel free to get in touch.

Managing better cash flow

Managing Better Cash flow

We all know that cash flow management is vital for a growing business. But where do you start?

Here are six steps to managing better cash flow.

6 steps to managing better cash flow

1. Invoicing

Invoicing is a good place to start your cash flow management.

In other words, invoice your customers as soon as your product is sold or your service is provided. The quicker you invoice, the quicker you should get paid. Also consider asking for a deposit up front – especially if you’re a service provider or your product has a high-end price.

As we mentioned, invoicing is only the start of your cash flow management. Here are five other steps you can take to improve your cash flow management.

2. Know your numbers

We understand that not everyone is confident with numbers. That doesn’t mean you shouldn’t know your numbers.

Having appropriate accounting software in place, like Xero, will help you always know your cash position. The right software will also help you forecast your cash flow.

Having a good handle on your business numbers will not only help you manage your cash flow, it helps you take advantage of new opportunities.

3. Keep your numbers current

We mentioned having the appropriate accounting software in place. But that software is only as good as the information you provide it. Keep your information up to date so you know the financial state of your business at any time.

If you don’t have the capacity or capability to manage your accounting software, then outsource to a qualified bookkeeper. We will manage your books and provide insights and forecasting so you can better know your numbers and focus on your business.

4. Don’t be a pushover

Make sure your invoices are paid on time and don’t be too lenient with your customers. Keep an eye on your accounts receivable and have an invoicing strategy for any overdue accounts.

You may sometimes need to understand your customers challenges, but that doesn’t mean you should be taken advantage of. Be prepared to act sooner rather than later.

5. Save for a rainy day

Sometimes quick access to cash can make or break your business. Saving for the proverbial rainy day (in other words, building a cash reserve) can provide you with that access if unexpected expenses occur. Or an opportunity arises to invest in your business that’s just too good to pass up.

6. Separate business from pleasure

It’s essential that you keep your business and personal finances separate. Especially if you want to know your business numbers so you can manage and forecast your cash flow effectively.

Cash flow is king

Yes, “cash flow is king” is an expression we hear all the time. And there is a reason for that. Managing your cash flow effectively means that your “cash” serves you and helps you build a successful business.

If you need help managing your cash flow, talk to us.

Creating a watertight accounts receivable process

Creating a watertight accounts receivable process

In business, it doesn’t get much more important than making sure your customers pay you.

And accounts receivable is all about getting paid for the work you do – in business.

It’s not exciting, but it’s important.

The accounts receivable process covers every part of your payment lifecycle. From finding customers to communicating expectations to billing correctly to following up on late invoices.

Building an accounts receivable process

So, how do you to build an effective accounts receivable process in your business?

The right customers

First, you need to work with the right customers and clients.

Before taking on customers, make sure you run credit checks. It’s also important to have them sign written terms, including billing timeframes and late payment penalties.

If you are comfortable doing so, you can also ask clients to sign a personal guarantee. This gives you the option of suing for an unpaid debt.

Effective invoicing

It’s vital that you always send invoices straight after the work is completed. This gets the payment ball rolling.

Make it as easy as possible for your customers and clients to pay you. You can do this by offering options like debit, credit or direct debit to.

Dependent on the apps you and your customers use, you may be able to set up to send e-invoices directly to your customer’s accounting or finance software.

Following up

Make sure you keep a close eye on your invoices. Make frequent and regular checks that payment has been made.

Have a process to follow up if an unpaid invoice is past its due date. This can be an automated process using cloud accounting software to send email reminders and statements. If that is unsuccessful included phone calls and consider debt collectors in your process.

Reviewing

For any customers that regularly pay their invoices late, consider changing their terms. Perhaps split your invoices and ask them to pay half upfront. Or suggest another payment method.

If there is not change to their late payments after changing their terms, you might consider letting them go.

Consistency is key

At the end of the day, having a watertight accounts receivable process is all about consistency.

Follow your process every time.

  • Select the right customers
  • Have clear policies and prompt billing
  • Ensure thorough follow-ups and reviews

Automating your process as much as possible ensures consistency. And being consistent in your process reduces the risk of unpaid bills and rogue customers.

If you’re ready to create an effective payment process talk to us about how we can help.

Should I focus on profits or cash flow?

Should I focus on profits or cash flow?

Turning a profit is at the heart of running any successful company. But should profits be the only financial focus if you're looking to create a stable, long-term business?

Cash flow is the beating heart of your business. Without an even and predictable flow of cash into the company, you can't cover your overheads, you can't pay your employees and you can't run your day-to-day operations – let alone think about expanding and growing the business.

So, what’s needed is a healthy cash flow position AND a good focus on driving profits.

Keeping on top of the financial management of your business can be hard work, especially if you’re new to accounting and the technical terms that are used to talk about money.

Understanding your finances

But if you’re going to be in control of your financial destiny, it’s important to get your head around the important process of cash flow management. This is especially true in the current business landscape, where sales revenue may be less buoyant, cash can be tight and the market is going through a challenging time.

Let’s look at some of the key things to understand about your finances:

Profit is a by-product of a successful business

As the owner, you want to make profits, but profitability isn’t the only goal. A business can easily be profitable, but also be highly unstable in the longer term. What you want is stability and consistent revenues.

Cash flow is the blood that keeps your business alive

Good revenues (income) serve to bring cash into the business. Without cash to cover your operating expenses, you have no means to keep the lights on in the business. So cash really is king!

Know your cost base and overheads

The flipside of your cash flow position is your costs. In an ideal world, you want more cash inflows than cash outflows, so it’s important to know your expenses and costs and to manage them carefully.

Be proactive about spend management and easing expenditure

If you can take action that reduces your spending, that is hugely positive for your cash flow position. Choose cheaper suppliers, negotiate better deals and bring that cost base down.

Drive more revenue, through increased sales and marketing activity

If you can increase your revenues, you also boost your cash flow. So it’s important to be proactive about running targeted sales and marketing campaigns to increase your sales.

Keep the cash flowing and the profits take care of themselves

If you achieve the ideal cash flow position, the company sits on solid financial foundations, the cash is there for investment and the business can grow. It’s that simple.

Talk to us about improving your cash flow management

Whether you’re new to running a business, or a seasoned owner who needs some financial support, we can give you the cash flow advice you need.

We’ll review your finances, delve down into your cash flow and will come up with key ways for you to increase your cash income and reduce your cash expenses. It only takes a few small changes to achieve a far better cash flow position for your business – helping you maintain positive cash flow AND generate meaningful profits.

Get in touch to talk through your cash flow concerns.

Cash Flow Management

Why you need to forecast your cash flow

Cash flow is the lifeblood of your business. And when it comes to cash flow management, preventing cash issues is far easier than trying to solve these issues after the event.

Positive cash flow comes from balancing your income (the cash inflows) against your expenditure (the cash outflows). If you’re in control of this then the business will always have the liquid cash needed to cover your liabilities.

Forecasting your cash inflows and outflows

Forecasting works by taking your cash data from prior periods and projecting it forward in time, giving you a ‘crystal ball’ that reveals the future health of your cash flow.

By running detailed cash flow forecasts, it’s possible to:

  • Understand your future operational cash flow – helping you to see the seasonal dips, or the projected drops in income, and get the early warning you need to take action.
  • Plan your costs and expenditure effectively – by working to strict budgets, looking at cost management and reining in expenses – so your future outflows are reduced.
  • Avoid the cash flow issues before they happen – giving you the information you need to plan ahead, take clear action and stay in tight control of your cash status.

Utilising technology to forecast

There are a number of tools you can use to forecast your cashflow, including Add-on Apps. One we often recommend is Futrli. With the ability to connect to Xero and Quickbooks, Futrli can provide integrated forecasting and reporting for small businesses.

Talk to us about setting up cash flow forecasts

If you want to get a grip on cash flow, we’ll help your tailor your accounting set-up and will provide the cash flow forecasting tools you need to reveal your future cash position.

Get in touch and let’s start forecasting.

cash flow vs profitability

Cash flow vs profitability

Cash flow vs profitability.

We all know that understanding cash flow is vital to the success of your business.

And having cash reserves is important to make sure you are never left short at crucial times, such as when wages are due, and when tax and loan repayments needs to be paid. Or, as 2020 has shown us, if the unexpected occurs.

That’s why it’s important to be able to forecast your business’ cashflow.

An accurate cash flow forecast should take into account your business’ current performance across revenue, operating costs, payment habits of both, financing commitments etc.

It should also include what you know about future trends and seasonality.

Cash flow vs Profitability - What’s the difference?

Having positive cash flow is different to being profitable.

Positive cash flow means your revenue comes in on time to pay your expenses and keep you from running out of cash.

Profitability means your revenue is greater than all the expenses required to keep your business generating that revenue.

Basically, timing is the difference between the two.

An example

If you sell $1,000 of goods every month and spend $500 in a month, you will make +$500 profit.

But if you’ve paid your suppliers for the $500 expenditure within the month and fail to collect the cash from the sale of goods within the month you would have -$500 in negative cash flow.

Why it's important to understand the difference between cash flow and profitability

Unfortunately, many businesses fail due to poor customer payment collections, and not understanding the difference between profitability and positive cash flow. 

It’s important not to rely on a profit showing in the Profit and Loss statement, as it is more reflective of positive cash flow than actual profit.

When relying on your bank balance and the P&L to indicate your business performance, you are at huge risk of forgetting all of the items you are responsible for “below the fold” on the Balance Sheet.

Often, the biggest, lumpiest cash out flows that you are responsible for appear there: GST, payroll taxes, loan repayments etc.

This is why it’s important to implement forecasting in your business. A great option to implement forecasting is Futrli. 

Talk to us about how we can help you forecast your business cashflow and profitability.

Coming out stronger

Coming out stronger

Coming Out Stronger

What does the future look like?

2020 and the COVID-19 pandemic has brought significant challenges for many people, including business owners.

While we are starting to see an easing of restrictions and a return to (Covid) normal the impact of these challenges cannot be underestimated.

While we cannot be sure of what’s ahead, it’s important to be looking forward and planning for your future.
If you're a small business owner, you can become more resilient and in control by applying these few strategies.

Coming Out Stronger Strategies

  • If you have been receiving JobKeeper 1.0, forecast your eligibility for JobKeeper 2.0 and 3.0
  • Prepare and maintain a cashflow forecast with and without JobKeeper
  • Know the key dates where Government support changes, reduces, or ceases
  • Prepare a breakeven analysis for various scenarios
  • Regain perspective by booking a meeting with your bookkeeper 
  • Set a regular review meeting to review and interpret your monthly numbers and key indicators
  • Do a check of your first quarter profits and do a forecast of your future profits to work out if any 2021 tax needs to be set aside
  • Document your future plans for your business - immediate exit, gradual exit, continuation, diversifying
  • If you haven’t already done it, get your 2020 Income tax done or scheduled for completion as soon as possible
  • Review your systems and processes to see where improved efficiencies can be made, especially through the introduction of apps that can reduce paperwork (and the time involved) considerably

If you are seeking advice on business Apps, we specialise in understanding the different options for different industries and businesses. We provide you with insights and guidance on what Apps would best suit your business.

Or, if you're interested in any of these measures contact us to discuss how we can help you become more strategic, resilient, and in control.

cutting costs and increasing prices

Cutting costs or increasing your prices

Are you considering cutting costs or increasing your prices?

With more than 85% of SMEs expecting a lower profit in the next nine months, the more prepared you can be for the unexpected, the better.

Managing expenses is a good idea at any stage in your business and you may need to consider increasing your prices.

Smart ways to get your costs under control


Cashflow has been a big issue for thousands of businesses this year, and when the money’s not rolling in, it can help to rethink your costs. To do it effectively involves more than just keeping an eye on outgoings. It’s about looking at all the moving parts of your business to see if your systems (or lack of) are costing you unnecessarily.

Here’s how:

Muck in

Do a cost control audit to work out where your big cost centres are and look at your systems for managing them.

Be aware

Don’t just slash your expenses. Track costs and look out for opportunities to trim fat or take a different approach.

Unite your team

Bring everyone together to monitor and analyse inputs and expenses. Reviewing and developing your systems? Get your team’s feedback.

Look to your peers

How do your costs compare to others? If a business of a similar size and production system to you is performing well, but spending less, explore what they’re doing differently.

Seek advice

Got a good idea of where the issues are, or feeling totally confused? Talk to your advisors about your next steps

How can I put my prices up without losing customers?

If you need to change your pricing to make ends meet, be honest and up-front with your customers at all communication points.

  • Make it clear on your website and social media that prices have changed and why.
  • Send an email to let all your clients and suppliers know about the changes.
  • Meeting people face-to-face? Make sure they’re aware of the price hikes before they’re invoiced - otherwise you could be in breach of the Fair Trading Act.
  • Provide the best customer experience you can by updating staff on any changes and advising them on how to communicate them to customers.
  • Worried you’ll lose fans? Consider staggering price increases of individual products over time.

Talk to us about how we can help you make better business decisions.

understand your cashflow statement

Understanding your cashflow statement

Understanding your cashflow statement

Understanding your cashflow statement means you know how your business has generated and used cash (and cash equivalents) within a specific time period. And this gives you an overall picture of your business performance. 

It is another important financial statement to understand in conjunction with the Profit and Loss statement and the Balance sheet. These three reports provide a good understanding of the financial position of your business.

How does it work?

The cashflow statement integrates the information provided by the profit and loss statement and the balance sheet into a current cash position.

Your cashflow statement is reported on a cash basis, while your other financial statements are usually reported on an accrual basis. Accrual income (from the profit and loss statement) is converted to cash by calculating the changes in the balances of asset and liability accounts.

Report categories

Your statement of cashflows is organised into sections that report on different types of business activity.

  1. Operating activities - all business income, expenses, assets and liabilities (except for those assets and liabilities reported in investing and financing activities).
  2. Investing activities - the purchase and sale of long-term investments, property, plant and equipment as well as security deposits paid to suppliers or received from customers and dividends received.
  3. Financing activities - the changes in balances of equity accounts, for example, issuing and repurchase of stocks and bonds and payment of company dividends if applicable. Loans are also included in financing activities.

Formal financial report packages usually include notes to the financial statements. The notes contain supplemental information that explain significant items or activities that did not involve cash transactions. 

Why is it useful?

Your cashflow statement gives you a valuable measure of cashflow in and out of the business over a given period. It shows the ability of your business to pay bills and fund operating activities. This gives you a picture of overall performance.

It also shows the relationships between assets, liabilities, equity and cash accounts. Your cashflow statement shows changes and movements over time. Whereas the balance sheet and profit and loss reports show account values at a single point in time.

Your cashflow statement gives you vital information on your business.

  • How strong is your cash position?
  • What is the long-term outlook for your business?
  • What activities generate the most cashflow?
  • What is the relationship between your net income and your operating activities? 

If you’d like to understand your financial statements, cash position and future outlook in more depth, give us a call today. We’ll help you identify and appreciate the strengths of your business.

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