5 ways to manage your business cash flow

Cash flow is the amount of money coming in and out of your business. By managing your income and expenses you can better manage your cash flow and plan for your future.

We list five practical ways to manage your business cash flow:

Forecast your cash flow

A Cash Flow Budget or Projection is a budget that shows within a given period, the planned source of cash and the intended use of money.

If you have good reporting in place you can better understand where you are, and if you’ve reviewed income and costs this should help you start looking ahead.

Cash flow forecasts don’t have to be complicated – they should reflect the size and complexity of your business – but they are an invaluable tool for most business owners.

They can help you track short term cash needs, monitoring against available working capital. They can also be used to support decision making.

If your business has taken on new debt, forecasting can help you understand how you can manage these commitments alongside your day to day business.  

Your accountant can help you set up a suitable cash flow model that works for you and your business.

Understand how your business is performing

Make sure you can track the performance of your business.

If you regularly monitor your finances, you are far more likely to spot risks, problems, opportunities, etc which will help you act quickly. It will also help you understand trends and changes in your business, which in turn will support forecasting your future finances.

You should review your bookkeeping and reporting systems to make sure they can provide you with the information you need. This doesn’t mean you will need expensive software or reporting tools. Your advisor can help you find a cloud based bookkeeping package that works for you and can talk you through the different ways they can provide the financial information you need.

Review your costs

It sounds obvious, but consider reviewing all of your ongoing costs to see if they can be trimmed.

Some may be fixed/contractual or relate to key services or advice and therefore cannot be reduced, but others may be more discretionary and stopped without impacting on the business.

Look at ways to protect and predict future income

Looking ahead and projecting numbers based on previous income levels may not provide you with a meaningful view, as buying patterns have changed.

Look at ways you can protect your income, or at least understand how it may change going forward. Talk to your key customers to see if that helps you understand their future plans. Consider payment plans for outstanding amounts and recurring payments for future work to give you some certainty over cash flow.

It’s also worth considering how you may be able to diversify to develop new sources of income.

If you can protect elements of your income, you can start to track new trends, which in turn will help you to predict what may happen in the future more accurately.

Keep reviewing the position

The final step is to keep reviewing the position. We have seen huge changes over the past few years and we still have some way to go before we get back to normal trading conditions.

Make sure that you review your financial position regularly, look at the reporting from your financial systems and keep close to your business.

As above, cash flow forecasts are hugely valuable in difficult times but they need to be as up to date as possible, so it’s worth updating them to reflect latest numbers and any key changes in your business.

How we can help

TaxAssist Accountants offers an expert professional advisory service including cash flow management and business planning. If you need help or advice with your bookkeeping, Year End Accounts, payroll, taxes, superannuation or BAS Returns contact us. Set your business up for success and book your free, no obligation consultation today.

Date published 2 Aug 2022 | Last updated 2 Aug 2022

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.