Cashflow: Step-by-step guide


We have all heard the saying that cash is king. In business this couldn’t be more true. Walk through many major shopping centres and you will see a myriad of ‘for lease’ signs or closing down sales, with nearly 40 per cent of business failure caused by poor cash flow, according to the Australian Bureau of Statistics.

Given that 97 per cent of all businesses in Australia are classified as small businesses, closing down due to cash flow is alarming but often a position many business owners get themselves into without realising it. Business owners spend the first few days, months and sometimes years perfecting their product or service. Then you have to find your ideal client and really focus on them to build the business pushing cash flow management to the bottom of your to do list.

1. Manage outstanding accounts and debtors
The easiest way to improve cash flow is to actually get paid for the work that you have already completed. Have a procedure in place to chase up/follow up outstanding accounts/debtors on a regular basis. These can be as simple as a reminder alarm in your phone for a certain time of the week, leveraging from automatic invoice reminders if you are a Xero customer or implementing a plug-in into your accounting software such as Debtor Daddy.

2. Progress payments and deposits
If you have a large project in the pipeline or a customer that is a notoriously bad payer, and you are not in the position to refuse work with this customer, ask for a deposit or request progress payments. Not only will this give the business an initial cash injection, it will also minimise risk and financial stress at the end of the job.

3. Costs
Regularly monitor costs and closely look at all expenses including: subscriptions, telephone, electricity etc to see if you can decrease costs. A couple of dollars a week doesn’t seem like much in one transaction, but after a few months or years this can really add up to an unnecessary expense.

If looking at your financial reports is not something that you enjoy or understand, outsource this to an accountant or bookkeeper, they also have an unemotional attachment to your business and will often give you the cold hard facts.

4. Assets
Assets are a large cost for starting and running a business but sometimes they turn into a liability by not bringing in enough or any revenue. Selling any idle assets such as plant and equipment, motor vehicle or business assets you are not utilising in the business can help with cash and also allow you to focus on new ways to create revenue. Do you only use a piece of machinery a couple of times a year and therefore it is cheaper to rent.

5. Increase productivity of employees

Look at ways you may be able to increase the productivity of employees, including:

  • Improving how jobs are performed; and
  • Regularly monitoring staff performance.

Creating systems for each job role creates key performance indicators for easy management of staff. If you are still a solo-preneur, still create these staff manuals, this way you are prepared for when your business needs to hire the next member of staff or if you decide to sell the business.

Achieving positive cash flow will not only improve the internal running’s of the business but can also help you become more competitive in your industry and allow you to offer better prices or discounts to your customers.

Cashflow: Increasing cashflow



One of the comments I often hear from my clients is that they want more exposure. They feel invisible, hidden amongst a sea of other business owners in their niche. Lost in the crowd. They are always looking for ways to stand out, increase their visibility and become known as the expert in their field, the “go-to” person in their niche. By doing this, they will attract more traffic, more followers, generate more interest, and therefore more clients, increase cashflow and, ultimately, have a more successful business.

So how can you get this credibility?
Well, I have a few simple tips that you can implement immediately, that will give you a real “bang for your buck” in terms of drastically boosting your credibility.

1. Testimonials
People place great store on the opinions and experiences of other people, particularly those that they know and trust. Or those high-profile people they admire and follow from afar.

Now, perhaps getting a celebrity endorsement may be a little out of your league right now, but do not underestimate its power!

For now, start with your current clients. It always surprises me how many people have no testimonials simply because they haven’t asked for them!  If you provide a great product or service that has been effective in solving your ideal client’s problems, then they are usually only too happy to sing your praises. By asking for the testimonial you are simply asking for a more concrete representation of the appreciation they have for your service. And by giving them clear guidelines about what a great testimonial entails, then you can make it very easy for them to provide one for you.

Remember too, that a testimonial is much more powerful if you can use the client’s name, and, if possible a photo too. Or a video testimonial.  This will cost you nothing but your time, and possibly some free samples of your products. But they are invaluable as a marketing and credibility tool.

Once you have these testimonials, you can use them everywhere. Put them on your website, on Facebook and other social media channels. On Facebook groups, in your newsletter, on your sales page, and of course in conversation with potential clients. The list and possibilities are endless.

2. Be visible
Being online is almost a necessity nowadays. You can reach a much larger audience, can scale your business, leverage your time and it is open 24/7. Be sure that you have a strong online presence. A website and a Facebook page are all you need. Choose a few key social media platforms and plan to be there regularly. Research Facebook groups where your ideal client hangs out, and post in there several times a day. Comment on other people’s posts and offer value and your expertise. But be very limited with any “salesy” activities. Your intention is to be seen as the expert. To gain trust and familiarity, to show some of your personality, so people find out more about you and what you do and stand for!

If your target market is in the business realm, then being on LinkedIn is a must. Posting regularly on your blog means that Google will treat you favourably, and will push you higher on the search engines.  Fresh content is smiled upon, so add it often.

Be everywhere. Consistently post videos on Youtube, perhaps some tips, product reviews, interviews with clients or other complementary experts in your field.

3. Get exposed
Free publicity is not as hard as it looks.  And the more places you are, the more people hear the name of either you or your company mentioned in different areas and channels, the more comfortable they will be, the more ready to trust you and want to use and pay for your expertise.

You can start local with your local newspaper. They are always keen to feature local residents. If you can present them with a quirky story with an edgy angle that will appeal to their readers, then you are in!

Radio, podcasts, and of course TV will give you huge credibility. If you can get interviewed, or can present a ready-made story that will interest them, you are in! Perhaps you can look at aligning your business with Valentine’s Day if you are in the dating game for example.

Write a book for the ultimate in credibility. Imagine how it sounds to your potential client to be able to list “author” among your other accomplishments.

So, there you go. Three very simple, yet also very effective ways to boost your credibility that you can implement immediately.

Survival kit for cash-strapped businesses


Being cash-strapped in your business can be soul destroying with all your hard work leading to what feels like nothing – but help is on the way.

Hopefully, you can follow a few of the steps below and put them in your game plan for surviving this challenging time and rising above the stress:

Get more business

I know, I know – easier said than done, right? Wrong.

Get on the phone, make those calls, drum up the business.

Make it about your clients and what you can offer them. What is it that’s going to add value to their lives and drive more profit into yours?

Think about other offerings. Is there another service, product or program you can offer that will leverage more income to you?

Think outside the box – perhaps a referral agreement with another vendor that can drive some interest to you and some fresh leads.

Look at your expenses – seriously

So you think you have looked at your expenses and you have cut as much as you can.

Again, have you really? Have you cut costs or just trimmed the fat? Is there still room to move?

I know it won’t make you popular at first but consider taking the coffee machine away and saving on those coffee pods.

I can hear your gasps, but I’m sure your staff would much rather have a company to work for than a coffee pod in the morning.

I did a calculation on how much this would cost on average, a business with six employees.

I worked out that the average coffee pod is 63c, and most staff would have about three coffees a day.

So 63c x 3 x 6 (staff) x 5 (working days) and you are looking at nearly $60 per week.

That means well over $3,000 per year can be saved with this one small change.

Meanwhile, have a chat to your insurance broker. Have you analysed your premiums recently? Can you put all your premiums with one company and get bigger discounts?

Can you premium fund your policies so the cost is spread over the year rather than bulk amounts?

You can also look at the space you have: is it a complete necessity to your business?

If it is, could you perhaps get the same productivity in a smaller space? Would your landlord be open to a reduction in your rent if you gave us some space?

Look at your invoices

There is technology out there, that allows you to take card payments on your smartphone.

You can even accept online payments directly from your invoices.

Think about the technology that exists to get paid faster and increase your cash flow.

Outsource smartly

Your hourly rate as the business owner is huge.

Its value is probably a lot more than you are even aware of. Are there things that you do that you can outsource so that you can concentrate on the tasks that bring in more customers?

Can a Virtual Assistant help with your newsletters, social media and mail organisation?

Call Wamit Bookkeeping Services now to chase up your debts and keep your books ticking along so you know your accurate cash position?

The key here is to use the time driving more business to you. Don’t get complacent otherwise you are just adding costs instead of driving profit.

Being a cash-strapped business owner will hopefully be a short-term ailment for your business.

By being in tune with your figures and considering the effects of decisions you make today and how they can affect you further down the track, you can keep ahead of the pack and be more empowered day by day.

Easy ways to keep track of your cash


Although electronic payment systems are popular, cash still plays a part in many business transactions.

How to track your cash transactions:

  • Reconcile sales at the end of each day – this will help you identify any discrepancies quickly.
  • If you use cash for business purchases, keep receipts and record it, or your accounts won’t balance.
  • When paying invoices using your business’ cash, ensure you make note of it – cross-reference your payment details with the relevant invoice numbers.
  • Don’t use business money to pay for personal purchases.

These may be little things, but they’ll help make managing your cash payments much easier.

Reserve Bank’s decision good for small business


Reserve Bank of Australia’s decision to leave the cash rate on hold today will help the country’s two million small and medium sized businesses grow, one of Australia’s leading fintech financiers said today.

The Invoice Market CEO Angus Sedgwick said that small businesses were the “backbone of our economy, contributing more than $343 billion to industry each year, and employing more than seven million people”.

He said, “Today’s decision by the RBA to leave interest rates on hold is good news for Australian small businesses as variable rates are currently as low as 3.26%. Reliable, cheap funding is important in helping SMEs grow, as they employ almost 70% of all Australians in the sector”.

“Small and medium sized businesses are the engine room of job creation, and the creative heart of its future prosperity. If banks can provide lower costs of funds to small business, the entire economy will benefit”.

According to the Australian Bureau of Statistics, half of all businesses go out of business in the first three years. And according to the Australian Securities and Investment Commission, poor cash flow is mentioned as a factor in 40% of business failures.

Almost half of all small to medium businesses have no policies in place to protect themselves from cash flow problems.

The Australian Government’s 2015 Financial System Inquiry found that small to medium businesses acquired money from a range of sources including extra equity, debt from relatives, debt from financial institutions or equity from venture capital funds. Mr Sedgwick said, “Maintaining interest rates at historically low levels would assist Australian SMEs grow, but cash flow strategies were up to individual companies to manage”.

$76 billion small business cash flow crisis


Cash flow is the number one issue affecting small to medium businesses right across Australia. According to The Invoice Market’s research that’s $76 billion worth of outstanding invoices and two million businesses drowning in a sea of unpaid bills.

If this issue was fixed, close to half a million jobs could be produced, reducing Australia’s unemployment rate to almost zero.

The Invoice Market’s SME Cash Flow Crisis Report illustrates that Australian businesses are constantly owed an average $38,000 each, with corporate customer excuses ranging from ‘lost in the system’ and ‘in dispute’ to ‘being reviewed internally’ and ‘being processed offshore’.


Cash flow is so detrimental that more than a third of Australian businesses have to cash in their own personal savings to deal with their business cash flow, which severely impacts their ability to pay for their living expenses. This results in creating a hindrance to employ new staff, and makes it difficult to pay current workers.

According to The Invoice Market CEO, Angus Sedgwick, the findings had significant ramifications for Australians. Small businesses are the “engine room of the national economy“. “Almost half a million small and medium sized businesses say they would employ more people if they could improve their cash flow position, reducing Australia’s 715,000 unemployment queue to 200,000 people or fewer”, Mr Sedgwick said.


According to the Australian Bureau of Statistics, half of all small to medium businesses go out of business in the first three years of operation. The Australian Securities and Investment Commission states that poor cash flow is cited as a factor in 40% of business failures.

Of the most shocking findings in this report is that even though late payments cost businesses money, it is the hidden costs that is the most revealing. Forty-six per cent of businesses have to ask twice or three times for their bills to be paid by erratic corporate customers.

Mr Sedgwick said that small businesses were actually the slowest in paying their bills to other small to medium businesses. “While Australians are renowned for their laid-back attitude, some businesses are having to ask for payment up to five times over several months, indicating that a new culture of ‘corporate selfishness’ has developed across Australia,” he said.

7 money-saving hacks even my accountant was impressed with

The financial side of running a business is one many soloists put their heads in the sand about. Here are seven ways you can be more savvy when it comes to managing your business expenses.


Being in the online financial comparison space, my passion centres on helping Australians be frugal with their money, and this doesn’t stop at the consumer. I want Australians, both consumers and business owners, to have the confidence to call their bank, vendor or supplier to negotiate a discount, no matter how small it may be.

The greatest hurdle to innovation for small-medium sized businesses is a lack of financial resources required to cope with the infinite monetary pressures of day-to-day business.

So here are seven money-saving hacks that will help you save a buck or two when running your business.

1. Round up your loan repayments

To cope with the financial pressures of managing a small business, many business owners resort to finance, such as a business loan or a personal loan. When it comes to structuring your loan, there are two key things you can do to ensure that you’re not paying interest for what feels like a lifetime:

  1. Round up your repayments, and
  2. Go fortnightly instead of monthly.

If your monthly loan repayment is $1,512, round this up to $1,520 or even $1,530. If you continue to chip away an extra $8-18 each month, you’ll pay down your loan much sooner and thereby shrink your interest charges.

2. Buy in bulk, negotiate

Whether it’s office equipment, machinery, stationery, or even snacks and drinks for the communal kitchen, always buy in bulk to receive a trade discount. Don’t be afraid to negotiate for a better price on anything and everything. Revisit the payment terms that you have with your vendor and supplier and see if they can offer you a better deal. You’d be surprised at how many suppliers want to retain your business, so use your customer loyalty and repayment history as leverage.

3. Be sharp with invoicing

Invoicing correctly is one of the most important ways to remain in control of your cash flow. Whether you do it yourself or you hire an in-house accountant, consider setting your payment terms to seven days so that your payments don’t go missing. Set yourself automatic reminders to follow up and chase any payments to manage your cash flow.

4. Be an early adopter

Regardless of which industry you’re in, be quick to adopt new technologies and innovations that will make your work life easier. Whether it’s standing desks, fool-proof wi-fi connection, dual computer screens, live website monitoring updates, media monitoring or competitive analysis software, or even internal communication systems such as Slack, investing in technology that improves systems and processes will save you money in the long run.

5. Be prepared for the tax man

Investing in a savvy tax accountant is one of the best things you can do as a business owner. Your tax accountant can help you prepare your financial records before the end of the financial year and they can also let you know which expenses you can claim. For instance, your accountant will advise you whether or not you can claim expenses such as bank fees and charges, business travel expenses or depreciating assets valued under $1,000.

6. Don’t settle for your rental amount.

Depending on your business, paying rent for your office is one of the biggest ongoing expenses you’ll incur as a business owner. Like you would with all your expenses, negotiate your lease terms with your landlord. Do some research into office or retail space in the area and see what other places are going for – if you think you’re being charged too much, speak up.

7. Be conservative with estimates.

You always need to account for ‘miscellaneous’ costs in your budgeting. Be conservative with your estimates and always budget slightly over your expected costs so if you encounter an unexpected cost, you won’t be left high and dry. Have a contingency buffer in place so that you have a plan B if you encounter an unexpected or emergency expense.

Launching your business from the ground up takes courage, and often passion is obstructed by the financial pressures that face business owners. Being savvy with your financial management and knowing where you can cut back on expenses will help you in your early years when you need it the most.

Better cashflow peter strong urges for national prompt payment protocol


The Council of Small Business Australia (COSBOA) has released a statement calling for the development and implementation of a national prompt payment protocol to ensure small businesses are paid by big businesses within a tighter timeframe.

Cashflow underpins every small business and when payments are not received in a timely manner, said CEO Peter Strong of COSBOA, it is a struggle to pay wages, rent, utilities, suppliers and services.

“Some big businesses will take more than 90 days to pay a substantial debt despite agreed payment terms being 30 days – and this can be the difference between insolvency and a healthy business continuing to operate,” said Strong.

COSBOA said it is time that politicians and big businesses commit to a voluntary code of conduct that sets out prompt payment terms to guarantee a better, more accountable payment culture.

“This issue needs to be fixed once and for all and we believe that one solution is the development and implementation of national prompt payment protocol: a voluntary industry standard where signatories agree to abide by the rules of the protocol and are publicly recognised for doing so,” said Strong.

In the statement, COSBOA draws attention to the big businesses letting down small businesses including major supermarket Woolworths, which pays on 60 days, and the mining giant Rio Tinto, which is proposing to change payments from 45 days to 90 days.

“These companies have such a control of the supply chain into resources and retailing that if they don’t pay on time, then most of their suppliers will also not be able to pay on time,” said Strong.

The protocol would call for businesses to pay within 30 days and would mirror the code already in place in the United Kingdom, which already has 1000 businesses signed up.

A body would be needed to establish and reinforce the ‘Prompt Payment Protocol’, said Strong, and it would only endorse businesses as complying signatories if they pay on time.

“The administrator of the protocol would dis-endorse any business that starts to pay late, which would be an embarrassing and public event. The Prompt Payment Protocol can be a powerful and inexpensive way to increase productivity in the Australian business community and decrease stress on individuals.”

How To Use Five Profit Drivers to Double Your Business’ Profit



Have you ever seen a business that has doubled their sales apparently overnight? Have you wondered what is the one thing they did to achieve that result? The chances are they did a number of things which when multiplied together gave the end result. In all likelihood, they understood and used the Power of Leverage.

Let’s see how that works. Consider this example.


In this example, a business has had 10,000 contacts in a year. This could have been phone enquiries or walk-ins, or it could have been outbound calling. And let’s say that 10 per cent of all contacts have been converted to customers with an average sale value of $500. And on average each customer bought twice in a year. The business’ turnover would be $1,000,000 and with a 25 per cent margin, their gross profit would have been $250,000.

All pretty basic. You will notice in the diagram above, each of the Five Profit Drivers has been marked by an arrow. They are:

  • the Number of Enquiries
  • the Conversions to Sales
  • the Average Value per Sale
  • the Number of Times a Customer Buys from You
  • the Gross Profit Margin per Sale

Increasing Profit Driver Performance

Each of these profit drivers can be increased. Most would agree, through good marketing strategies, each of the Profit Drivers in the example above could be lifted by 15 per cent without a lot of difficulty. For example, the Number of Enquiries could be lifted to 11,500 without much effort, as could the conversion rate to sales be lifted to 11.5  per cent. We can see here what would happen if all the Profit Drivers could be lifted by 15 per cent.


If each of the Profit Drivers is increased by 15 per cent, this would result in an increase in gross profit of 100 per cent!

This works because each Profit Driver increase is Multiplied not added to each other increase. The implication of this is small increases in each of the Profit Drivers can have a very large impact on your bottom line. In this example, we have assumed a uniform 15 per cent increase in each Profit Driver to achieve a doubling in profit.  Now in practice, it is usually easier to get increases in some areas than others, as good results may already being achieved for some of the Profit Drivers.

For example, you might have a conversion rate of enquiries of 80 per cent. Now you could spend time increasing you conversion rate to 90 per cent or even higher, but there is a law of diminishing returns. That is it takes ever more effort to get gains at the high end and you will never attain 100 per cent.  In this case, increasing enquiries or your gross margin, may achieve better reward for effort, especially if little time has been spent on these strategies in the business.

Generally businesses know the areas on which they have not focused. Therein lies the potential goldmine of opportunity and I have yet to see a business that has maxed out on every single profit driver.

Action Steps

  1. Start collecting data for your current Profit Driver Performance.
  2. For each Profit Driver develop strategies for improvement.
  3. As you implement these strategies, monitor the impact on each of your Profit Drivers and your Gross Profit.


How to manage cash flow in a seasonal business

Anyone running a seasonal business knows the story: one day, there is a pile of cash in the bank, then it appears to disappear overnight. Here are five tips to help you manage your cash flow if you ever find yourself in this situation.

1. Get better at managing your receivables

If you offer credit to your customers, what are your terms of trade? It’s a question I often ask ,and the response from the business owner is typically 7 days or 14 days. And yet, when I do a simple calculation to understand days in receivables, more often than that the result is much higher than that.

To calculate your days in receivables, pull out your latest full year financial statements. Turn to the balance sheet, and note down the figure shown for accounts receivable or trade debtors. Let’s assume that number is $127,000. We will label it A.

Next, look at your total sales in your profit and loss account. We’ll assume that number is $500,000 and we’ll label that B.

The calculation for days in receivables is now A/B multiplied by 365. So in this case, 127,000/500000 x 365, which equals just short of 93 days. What that means is despite your stated terms of trade of 14 days, it is actually taking your customers three months on average to pay your invoices! This is not uncommon. Do your own calculation, and if the number is too high, give someone on your team the task of rigorously following up your customers to secure payment more quickly. In the case of this fictional business, every day by which you reduce the days in receivable will free up close to $1,400 in cash. So, even if you get it down to 50 days — still not even close to your terms of trade — you will find your bank balance is boosted by approximately $60,000 relatively to where it would have been had you left the number at 93 days.

2. Set money aside to pay taxes

In most jurisdictions, and certainly in Australia and New Zealand where most of the readers of this blog reside, goods and services taxes can cause problems for small business owners because of the way they operate. Essentially, when you make a sale (and assuming you are registered for GST) you collect the tax on top of your sales price and hold that for a period of time before remitting it to the tax office on your GST return.

Let me use Australia as an example. Let’s say you make a sale of $5,500 (including GST) on 1st July. The GST component will be $500, based on the current rate of GST of 10%. You then need to send that to the tax office along with all other GST amounts collected, less any GST you have paid on your purchases — but not until 28th October. This is good on one hand — you get to keep the cash in your bank account for up to four months, depending how quickly the invoice was paid — but can cause real problems for business owners who are not conscious of their future tax obligations and can be particularly tricky in seasonal businesses. Oftentimes the collected GST component is spent, and then when it comes time to file the GST return, there is not enough money in the account.

If you find yourself consistently short at tax time, consider opening a separate savings account. At the end of each week, deposit 10% of all sales invoiced that week. (You should work with your accountant to determine a more accurate number, but 10% will often be enough because of the offset of GST on purchases. If you operate in a country where the GST is higher, then increase the number accordingly.) That account should be a no-go area until you use it to pay the GST to the tax office when due.

3. Consider refinancing your debts

Many businesses carry credit card debt, which is extremely expensive. They may also have a couple of different business loans on their books. If you find you are being hit with significant loan repayments and hefty interest charges, talk with your accountant or financial planner about refinancing. Depending on your circumstances, you may be able to consolidate your debt into one business loan and possibly secure a more favourable rate of interest to boot. This could help reduce your outgoings, which is of utmost importance when you are faced with seasonal variances in your business.

4. Plan for demands on the business’s cash flow that do not appear on the profit and loss account

Many business owners find there is a profit on the profit and loss account but no cash in their bank account. It is important to understand why that is happening (your accountant can help) but also to plan for non-P&L account cash demands in the upcoming period. For example, none of the following cash demands would appear on the profit and loss account for your business:

You need to buy a new machine and because you have just had a great month, you write out a cheque for $50,000. Who needs finance when cash flow is so great?

The term on your car loan is up and you send the balloon payment of $11,500 to the financier.

You are about to celebrate your 10th wedding anniversary so you pull $20,000 out of the business as drawings to pay for a round the world cruise.

You are developing software in your business and you’ve been advised by your accountant to capitalise it (meaning it appears on the balance sheet rather than the profit and loss account, and is depreciated over a period of time.) You spend $40,000 on development in the period.

If you are not aware of this, you will find that your cash balance will increase by approximately $120,000 LESS than your profit — maybe more if compounded by other issues such as customers paying you more slowly than they did last year. This can cause real strain on a business’s cash flow if it is not planned for in advance.

5. Prepare a detailed cash flow forecast and budget

Again, your accountant can help you here. If your business is seasonal and prone to cash shortfalls, talk with your accountant about a three-way cash forecast and budget. What this means is that you forecast out month by month, line by line, your profit and loss account, cash flow forecast and balance sheet to make sure everything is accounted for. Then, really importantly, monitor this monthly against actual results. That way, if something does go awry, you can take action before it’s too late.