Business Cash Flow Confidence: Practical Steps to Stabilise Your Business Finances

Welcome, to the Podcast! Our newsletter made easy! Please note, this podcast features AI-generated voices for your hosts, Mia Taylor and Leo Baker, bringing you expert insights from owner, Ben De Rosa, at Aevum Accounting. Each week, we're here to help you confidently navigate the ins and outs of Australian tax – whether it's for your individual finances, or the complexities of your business. We'll cut through the jargon to give you strategies for compliance, smart planning, and that ultimate peace of mind. So, if you're looking to understand your obligations, maximize your financial position, or simply gain clarity on your money matters, you're in the right place. Let's get started with our review of the week! Two short 5 star google reviews from businesses this week. Aaron Coster from A.C. Electrical & Air Conditioning says "Best in the business! Saved us tens of thousands in tax over the past 10 years. Recommend to all". and Matthew Feeney from Precision Drilling Australia "Ben offers a Great service from taking care of my business accounts to doing personal tax returns highly recommended!!!". With not one but 3 exclamation marks! Thank you for the amazing feedback Aaron and Matthew! We love hearing from our clients and a positive review gets our podcast started on the right foot. Over to you Leo. Hello everyone, and welcome back! I’m Leo Baker. And I'm Mia Taylor. Today, we're diving into a topic that's often called the lifeblood of any business, big or small:... Cash Flow Management. That's right, Mia. It sounds simple, but a lack of understanding here can be the downfall of even a profitable business. You can have fantastic sales and a healthy profit margin on paper, but if you don't have cash in the bank to pay your bills, you're in trouble. It’s the difference between thriving and just barely surviving. Exactly. And to help us demystify this crucial area and share some real-world wisdom, we're absolutely thrilled to welcome a very special guest to the podcast today. You might think three AI voices in one virtual room is a bit much, but trust us, his insights are 100% authentic! He’s Harvey Green, an experienced Australian business owner who’s successfully run many of his own ventures, and a valued client. Please give a warm welcome to Harvey Green! Thanks, Mia and Leo! It’s a pleasure to be here. I've certainly learned a thing or two about cash flow over the years, sometimes the hard way, so I'm happy to share my scars and successes. Harvey, that's exactly what we need! Let's start with the basics. For our listeners who might confuse cash flow with profit, can you briefly explain the difference and why managing cash flow is so incredibly critical for a business's survival and growth? Great question, Leo. It's the mistake I made early on, like thinking your garden is healthy because it has green leaves, but forgetting to water the roots. Profit is what you have left after you subtract your expenses from your revenue over a period. It's on your P&L, often an accrual-based figure. But cash flow? That's the actual money, the cold hard cash, moving in and out of your bank account. You could have a huge profitable sale, say, for $50,000, but if the client takes 90 days to pay, you don't have that actual cash now to cover your weekly wages, rent, or supplier bills. I've seen businesses, and almost been one myself, go broke with a healthy profit on paper because the actual cash wasn't there when needed. It's the difference between thriving and just surviving paycheck to paycheck, or, in business terms, invoice to invoice. Cash flow is oxygen for a business. That's such a crucial distinction, Harvey. It highlights why understanding your cash flow isn't just an accounting exercise; it's fundamental to making smart, timely operational and strategic decisions. So, let's talk about those practical steps. What are the key levers a business owner can pull to improve their cash flow, starting with Accelerating your inflows? Yes Mia, let's look at the income side first: Accelerating your inflows. My biggest lesson here was: invoice promptly and clearly. When I started, I'd often wait a week or two to send an invoice, thinking I was busy with other things. That's a week or two delay on money coming in that you're literally giving away. But now, invoices go out the moment the job is done or the service is delivered. That's a simple fix that can have a huge impact. What about the terms you set, or chasing those payments? Clear payment terms are essential. State "7 days," "14 days," or "30 days" clearly on every invoice, not just "due on receipt." And don't be afraid to chase. I used to hate chasing invoices, felt like begging. But it's your money! Set up automated reminders through your accounting software. Beyond that, make friendly calls a few days before the due date to check if they received the invoice and if everything is okay. It’s proactive, not reactive. For larger invoices, I've even offered small early payment incentives, like a 1% discount if paid within 7 days. It can be worth that small cost if it gets you crucial cash quickly, especially if you have an upcoming large expense. Strong client relationships also play a role – trust built over time means clients are more likely to prioritize paying you. Those are fantastic, actionable tips. It's all about making it as easy as possible for money to come in, and gently nudging it along when it slows down. Now, on the flip side, we have Controlling Outflows. How did you approach managing the money going out, Harvey? This is where I got really disciplined. I learned to negotiate payment terms with suppliers. If a client pays me in 30 days, I try my absolute best to get 30-day terms with my suppliers too, so my outflow aligns with my inflow. Don't always pay a bill the moment it lands if your terms allow for longer. Cash is king in your bank, not theirs. It's not about being unfair, it's about managing your liquidity. That's very shrewd advice. It's about optimizing your working capital. What about other common outflow culprits, like inventory or those sneaky recurring subscriptions? Oh, absolutely. Inventory management is huge. For product-based businesses, having too much stock sitting stagnant on shelves is literally cash tied up and not working for you. You need to balance having enough to meet demand with not having dead stock. It's a continuous dance. And those recurring expenses, Mia – those small monthly software subscriptions, online tools, cloud storage – they add up faster than you think! I make it a habit to go through them quarterly and ask, "Are we still actively using this? Is it still worth the cost? Can we downgrade to a cheaper plan?" It's surprising what you can cut or renegotiate when you truly audit your outflows. Even setting up a basic budget for each department or expense category can provide powerful control. That regular review is excellent. It ensures your money isn't just silently leaking away. It's proactive cost management, not just reactive cutting. Now, once you've got those inflows accelerating and outflows controlled, the next crucial step is about predicting the future, isn't it? Forecasting and Building a Cash Flow Buffer. Precisely. This part truly changed the game for me, transforming stress into strategic decision-making. It doesn't have to be a complex spreadsheet with a crystal ball. A simple 13-week cash flow forecast, even in a basic spreadsheet, can highlight upcoming shortages or surpluses before they become crises. You just plug in your expected income and expenses week-by-week for the next three months. It helps you see if that big supplier bill due in six weeks is actually covered, or if you need to start chasing payments more aggressively now. That proactive approach is invaluable. Seeing potential dips ahead of time means you can take immediate action – maybe defer a non-essential equipment purchase, arrange a short-term line of credit, or push harder on those overdue invoices. It's like having a financial radar. And the buffer, Harvey? How important is that? The buffer, Leo, is your ultimate safety net. It's your business's emergency fund. I always aim to have at least a month, ideally two or three months, worth of operating expenses sitting in a separate, easily accessible account. This isn't for spending; it's there just in case. An unexpected equipment breakdown, a major client paying late, a sudden downturn in sales during a slow season – that buffer lets you sleep at night. It provides that core stability and reliability that Aevum Accounting champions. It's the difference between panicking and calmly finding a solution when the unexpected happens. That's fantastic advice, Harvey. It ties directly into Aevum Accounting's values of stability and enduring value. Now, for our listeners who might be thinking, "This sounds great, but where do I even start with tracking all this and building these forecasts?" Let's touch on the critical role of Technology and Professional Help. Absolutely. Modern accounting software is your absolute best friend here. Tools like Xero, QuickBooks Online, or MYOB help you track all your income and expenses in real-time, automatically pulling data from your bank accounts. Many even have built-in dashboards and reporting that give you instant snapshots of your cash flow, debtor days, and creditor days. It’s light years ahead of manual ledgers and guesswork. Oh, I can vouch for that. I started my first business with pen and paper, then clunky desktop software, and it was a nightmare. Moving to cloud accounting software was transformative. It freed up so much of my time and gave me accurate data instantly. I could see where every dollar was going and coming from. It put me in control. But even with great software, sometimes you hit a wall, or you need an expert eye to help you interpret those reports and turn data into decisions. That's exactly where a proactive accountant and advisor like Aevum Accounting comes in. Knowing when to seek professional help is not a weakness; it's a sign of smart business ownership. If you're consistently running short on cash, if your forecasts are always off, or if you're just unsure how to interpret your financial reports and make strategic decisions for growth, that's the time to reach out. We understand that business owners wear many hats, and you can't be an expert in everything. Exactly. At Aevum Accounting, our team, under Ben De Rosa’s leadership, doesn't just do your tax returns; we offer comprehensive business structuring, coaching, and advisory services. We help you set up and optimise your accounting software, ensure your bookkeeping is watertight, interpret your financial reports to highlight critical insights, and develop those forward-looking strategies for cash flow stability and sustainable growth. We can help you identify trends, opportunities, and potential problems before they escalate. I can personally attest to the value of having Aevum Accounting in my corner. They helped me transition to better systems and, more importantly, understand what the numbers actually mean for my business. It’s given me so much more confidence, reduced a lot of my financial stress, and allowed me to focus on running and growing my business, rather than constantly worrying about cash. It’s an investment that truly pays off in peace of mind and tangible growth. That's wonderful to hear, Harvey. Your experience truly highlights the real-world impact of good cash flow management and the right support. So, for all our listeners out there, remember: cash flow is king. Take those practical steps – accelerate inflows, control outflows, forecast, and build your buffer. And don't hesitate to reach out for that expert guidance from Aevum Accounting when you need it. It’s about building a robust, resilient business. And that brings us to the end of another episode! We hope today's discussion has provided you with valuable insights and helps you navigate your financial world with greater confidence. Before we go, a quick but important reminder: The information and strategies shared on this podcast are for general informational purposes only and do not constitute specific tax or financial advice. Everyone's situation is unique, and tax laws are complex and constantly evolving. For personalized advice tailored to your specific individual or business needs, we always recommend consulting with a qualified professional. You can connect with our team at Aevum Accounting – visit our website to learn more about our services, including detailed tax guides for various occupations, and how we can support your financial journey. Thank you so much for tuning in! If you enjoyed this episode, please consider subscribing, leaving us a review, and sharing it with anyone who might benefit. Your support helps us reach more Australians. Until next time, stay savvy, stay proactive, and keep building your financial future! From all of us at Aevum Accounting, goodbye for now!