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PKF NENW News • 2023-03-01

Simplify Your Cash Flow

Simplify your cash flow

Five cash flow management tips to set your business up for 2023


The first quarter of the calendar year can be a challenging time for many businesses. Following planned Christmas / New Year downtime, many staff and clients will choose to enjoy a well earned summer break.  By February staff may have returned to work, but lower customer receipts, ongoing payroll obligations, and an ATO Activity Statement that reflects the pre-Christmas rush, will test the cash reserves of even the most resilient businesses.

Cash flow is the flow of money into and out of your business. It primarily comprises inflows from customer revenue and investment earnings; and outflows from supplier payments, payroll, capital expenditures, loan repayments, and tax obligations.

Cash flow can be very seasonal. Like a river, cash flow is ever changing and influenced by the environment around it. It is the lifeblood of the business. Without it the business cannot sustain its operations. Understanding, predicting and planning for seasonal changes is critical.

So how should you manage your cash flow during this period, while you wait for the normal cycle to return?

1. Make budgeting a habit

Invest in a robust three-way profit and cash flow forecast that takes into account the timing of customer receipts, supplier payments, finance commitments and tax payments. This process will help you identify the peaks and troughs in your cash flow cycle. A budgeting process will help you identify your working capital needs, it will allow you to explore different sources of funding to meet peak commitments, and it will demonstrate the best times of the cycle to invest in new product lines or service offerings. 

2. Focus on getting paid

Review your accounts receivable process. Make sure it is robust, and that unpaid accounts are followed up regularly. Consider ways of utilising technology to get paid earlier. Invoice often and early to avoid chasing huge payments. Consider renegotiating trading terms with your customers to minimise exposure. You could implement late fees to discourage late payments, or encourage early payments through discounts or promotions.

3. Managing costs

Understand your cost of production and invest in new equipment, systems and technology that automate repetitive tasks and eliminate wasted time and resources. Inefficient processes are costly to maintain. Perform a cost-benefit analysis to understand how new equipment might reduce your cost of production. Or, investigate the ever-changing suite of software solutions available to streamline internal processes.

Renegotiating contract terms doesn’t need to be restricted to your own clients. Regularly review your current supplier contracts to ensure that you are receiving competitive terms or pricing.

4. Protect your business cash reserves

For younger businesses it is important to establish disciplined approach to managing personal and business cash flows separately. In many start-ups the owner IS the business. This can lead to the temptation of living out of the business account. Establishing separate buckets for business and personal cash flows can be crucial to maintaining liquidity and ensuring future business success. It also helps to establish this habit before business partners and outside investors join the business.

5. Get help

The process of managing cash flow is never ending, and can be overwhelming, but you don’t have to do this alone. Be deliberate about establishing good processes and habits. Partner with a trusted advisor who can guide you and keep you accountable.


If you’d like to find out more about how we can assist, please Contact Us today!


Written by Verona Gimbergh.

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