Cash Flow Management Guide

Profit is an opinion, cash is a fact

A business can be genuinely profitable on paper and still miss payroll. That happens because profit is recognised when you invoice, but cash arrives when customers actually pay — and in between sit wages, rent, stock, super and the ATO, all of which want real money on real dates. Managing cash flow is the discipline of managing that gap.

Know your cash flow cycle

Every business has a rhythm: money goes out to deliver the work, then comes back when customers pay. Three numbers describe yours:

• Debtor days — how long, on average, customers take to pay you.
• Stock days — how long cash sits tied up in inventory or work in progress.
• Creditor days — how long you take to pay suppliers.

If debtor days plus stock days are much larger than creditor days, growth will consume cash rather than generate it. That's the trap that catches fast-growing SMEs: every new sale widens the gap before it fills it.

Build a rolling forecast

A rolling short-horizon cash forecast — thirteen weeks is the common convention — is the single most useful finance habit an owner can build. It doesn't need to be fancy:

• Start with today's actual bank balance.
• List expected receipts week by week, based on invoice due dates and honest payment behaviour, not hope.
• List committed outgoings: payroll, super, rent, supplier payments, loan repayments, and your BAS and tax obligations on the ATO's current due dates.
• Update it weekly. The value is in the updating, not the spreadsheet.

A forecast turns nasty surprises into early decisions — chase that debtor now, delay that purchase, talk to the bank before you need to.

Tighten the money coming in

• Invoice immediately. Every day between finishing the work and sending the invoice is a free loan to your customer.
• Shorten your terms where the market allows, and consider deposits or progress payments for larger jobs.
• Make paying easy — payment links on invoices measurably speed up collection.
• Chase systematically. A polite, automatic reminder sequence beats sporadic awkward phone calls, and it removes the personal friction of asking.

Manage the money going out

The ATO is usually an SME's largest and least flexible creditor. Set aside GST, PAYG withholding and super as you go — ideally in a separate account — so BAS time is a transfer, not a scramble. Spreading annual costs, reviewing subscriptions and negotiating supplier terms all help, but nothing helps as much as never spending tax money that was never yours.

Warning signs worth acting on

• Using this month's receipts to pay last month's bills.
• Super or BAS paid late "just this once" — it's rarely once.
• Debtor days drifting upward quarter after quarter.
• No one in the business can say what the bank balance will be in six weeks.

If two or more of these sound familiar, the fix is usually process, not heroics — a weekly finance rhythm that someone owns. That's the heart of what we describe in finance operations, and a big part of escaping the coordination tax that eats owner time.