With Australian small businesses owed an average of $38,000 each in outstanding payments, poor cash flow is one of the main reasons they fail. Here’s how you can stay on top of your cash flow.

Cash flow is the life blood of your business. While small businesses go bust in the long term through lack of profit, in the short term they fail because they don’t have enough cash to pay their bills. Poor cash flow is cited as a factor in 40% of Australian business failures[1], and 38% of business owners are forced to dip into their personal savings to keep their business afloat[2].

So how can you help ensure your business stays in positive cash flow? Here’s five ways:

1. Forecast your cash flow

A cash flow forecast is an estimate of the cash you expect to bring in and pay out over a period of time, usually 12 months. By using your sales and payment history, you can estimate your likely sales for each week or month, as well as payment timings, and all likely costs.

Forecasting your cash flow can help identify potential shortfalls in cash balances, so it’s a great early warning system. An easy way to gain the historical data you need to forecast cash flow is with an online accounting solution, which can offer automatic bank feeds that allow you to quickly access historical transactions.

2. Take action to minimise late payments 

With more than 40% of Australian small to medium-sized businesses having more than 11 invoices outstanding [3], late payments are one of the main causes of cash flow problems. 

To increase your chances of prompt payment, remember to invoice immediately following a job. Offer easy online payment options or EFT to simplify matters. Clearly stipulate your payment terms on your invoice and discuss this with your client before accepting a job.

If a payment is late, be certain to follow up with your client as soon as possible to avoid your invoice falling to the bottom of the pile. Also, consider implementing a penalty fee for overdue payments.

3. Keep a close eye on your accounts

Many small businesses are unaware of cash owed to them simply because they don’t keep track of their accounts.

An online accounting solution can help you stay on top of your accounts with automatic bank feeds. This feature means you don’t need to download and import bank statements manually – your bank transaction data flows seamlessly from your bank – allowing you to easily track outstanding payments.

4. Pay bills only when due and negotiate terms with suppliers

The longer you can hold onto your money, the better your cash flow. Check each invoice for payment terms and pay on the last day possible. It’s also worth investigating to see if you can extend payment terms with suppliers, for instance, if you can settle your bill in 60 days rather than 30.

If you’re thinking about making a big order, don’t miss the chance to negotiate. Could you set up a regular payment plan for example rather than paying off outstanding amounts in one go?

5. Manage your stock intelligently

Monitoring stock closely and only ordering on an as needed basis is essential to avoid unnecessarily outlaying cash. Work out what sells quickly and profitably and make sure you’re not tying up funds in slow moving items. For a quick cash flow boost, try selling off old or outdated stock at a discounted price.

Try a free 35-day trial of Sage One cloud accounting software to see how you can easily


forecast and track your cash flow, create and send invoices on the go, and access your business’s real-time financial data anywhere, at any time.

[1] Australian Securities and Investment Commission

[2] The Invoice Market, “SME Cash Flow Crisis Report”, 2017

[3] The Invoice Market, “SME Cash Flow Crisis Report”, 2017



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