Managing Your Cashflow



The products and services of your company are purchased by your clients, even if the money is electronic it is still termed cash. If you have enabled your customer to pay later under terms (eg. 7 days), then it will be classed as an account receivable. Expenses, such as rent, loan payments taxes, and business purchases and other accounts payable are going out of the business. 


In simple terms, a cash flow is a representation of the money coming in and the money going out of your business, so if there is more money that is received than the money going out, then you are what is termed as "cashflow positive" and therefore have money to pay your expenses when they are due. However, if there is more money flowing out of the business to pay expenses than the money received, then you are "cash flow negative", which means you will need to find the money outside of the business to cover your expenses. There are many businesses that may occassionally require additional money (working capital) such as a loan or line of credit to cover shortfalls in a negative cash flow situation.

​In this article we cover:

  1. Cashflow considerations

  2. Twenty questions to ask yourself about your cashflow

Cashflow considerations

Since cash flow is the lifeblood of a business, maintaining a healthy cash flow should be a top priority for the business owner.

Some considerations for managing cash flow effectively include:

Credit Policy:

  • Be sure to have a consistent and firm policy about when and how you will extend credit. Remember work done but not invoiced or not paid is effectively an interest-free loan to the customer. 

  • Continually monitor the age of the accounts receivable. That is the time taken for debtors to pay their accounts. Is the period of payment expanding?

  • Collecting debts can be a painful experience but having good standards in place and making sure they are well communicated and enforced will increase the health of your business.

Taxation Payments:

  • Most businesses will need to submit quarterly Business Activity Statements (BAS). Keep track of your GST liabilities and ensure you are reserving appropriately.

Inventory Management

  • Strike the right balance between maintaining supplies while not putting excessive amounts of cash into unsold stock. In other words, don’t be seduced by discounts, buy what you need when you need it.

Cashflow Budgeting

The cash flow budget shows cash in and cash out over the trading period. Keeping an up to date cash flow budget is an essential tool in managing your business well. Key elements to be considered when developing cash flow budgets:

  • The current cash you have on hand.

  • The cash you are likely to receive from cash sales in this trading period (month) and from credit sales from previous trading periods. This is where you need to examine if you are getting paid on time.

  • The cash you need to pay out in this trading period and whether your cash left on hand is sufficient.

Twenty Questions to Ask Yourself About Your Cashflow

If you have determined that you have trouble meeting your company’s bills, then it is time to ask yourself some questions regarding your cash flow. It is with these answers you will be able to determine if you need an injection of capital, modify your credit terms, reduce your spending, etc.  Based on the answers to the questions below, it might be time to seek some advice from a trained and accredited professional.


At the BEC we can assist you with your needs around Finance and Cashflow as we have a range of trained advisors who cover specific business areas.  

  1. Do I have the adequate cash flow to carry me through the next trading period?

  2. What is the turnover rate for my inventory?

  3. How do I know whether my inventory turnover rate is as good as it should be?

  4. What is the current ratio for my business?

  5. What proportion of my credit accounts are outstanding 30, 60, and 90 days or more?

  6. Am I extending too much credit to my customers?

  7. What proportion of my sales revenue is taken up with administration expenses?

  8. How do my COGS compare with similar businesses in the industry?

  9. How does my Gross Profit compare with similar businesses in the industry?

  10. Am I too heavily geared through debt financing?

  11. Which product line is my best seller?

  12. Which product(s) are unprofitable?

  13. Do I have any ‘key account customers’ I should be looking after?

  14. What is my Net Profit ratio?

  15. What is the return on my investment in the business?

  16. Am I getting an adequate return to allow me to continue in business?

  17. Am I financing my business by delaying creditors?

  18. Do I need to expand my capital base?

  19. Do I need software to adequately analyze my accounts?

  20. Will I survive the year?


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