Cash Flow Confidence: A 4-Step Guide to Stabilising Your Business Finances
- Ben De Rosa
- Nov 16
- 4 min read
It’s one of the most stressful and common problems in business: you look at your profit and loss statement, and it shows a healthy profit. But you look at your bank account, and there’s barely enough to cover next week's payroll. If this sounds familiar, you're not alone. This is the classic, and often fatal, confusion between profit and cash flow.
Many business owners think their company is healthy because it has "green leaves" (profit on paper), but they forget to "water the roots" (manage the cash in the bank).
At Aevum Accounting, we've seen businesses go broke with a healthy order book simply because the actual cash wasn't there when it was needed. Cash flow is the oxygen for your business. This guide will give you four practical steps to take control, build stability, and start making strategic decisions with confidence.
First, Understand the Critical Difference: Profit vs. Cash Flow
Before you can fix the problem, you must understand it.
Profit is what's left after you subtract your expenses from your revenue. It's an accounting figure on your Profit & Loss statement, often based on accrual accounting. For example, you make a $50,000 sale. That $50,000 counts towards your profit for that month, even if you haven't been paid yet.
Cash Flow is the actual, physical money moving in and out of your bank account. It's the cold, hard cash you have available to pay wages, rent, and suppliers.
If you make that $50,000 sale but the client has 90-day payment terms, your profit looks great, but your cash flow is zero. You can't use on-paper profit to pay a bill.
A 4-Step Plan for Cash Flow Stability
Managing your cash flow comes down to four key areas of discipline.
Step 1: Accelerate Your Cash Inflows
The goal is to get the money you've earned into your bank account faster.
Invoice Immediately: Don't wait until the end of the week or month. Send your invoice the moment the job is done or the service is delivered. Waiting a week to invoice is giving your client a free seven-day loan of your money.
Use Clear Payment Terms: Remove vague terms like "due on receipt." Be specific and firm on every invoice: "Payment due within 7 days."
Be Proactive, Not Reactive: Don't wait until an invoice is 30 days overdue. Use your accounting software to send automated reminders. Make a friendly follow-up call a few days before it's due to ensure they've received it and all is in order.
Offer Incentives: If cash is tight, consider offering a small 1-2% discount for payment within 7 days. That small cost can be worth the price of getting crucial cash in the door quickly.
Step 2: Control Your Cash Outflows
This is about being disciplined and strategic with the money going out.
Negotiate Supplier Terms: If your clients pay you in 30 days, try to get 30-day terms from your key suppliers. Aligning your outflows with your inflows is a powerful way to manage your working capital. Don't pay a bill the moment it lands if you have 30 days—that cash is king in your bank account, not theirs.
Manage Inventory: For product-based businesses, stagnant stock on a shelf is literally cash that is tied up and not working for you. Find the right balance between meeting demand and not over-stocking.
Audit Your Subscriptions: Those "small" monthly software subscriptions, cloud storage, and online tools add up fast. Set a quarterly reminder to review every single recurring expense. Ask: "Are we still using this? Is it worth the cost? Can we downgrade to a cheaper plan?" You will be surprised at what you can cut.
Step 3: Forecast the Future
The best way to manage cash flow is to stop being reactive and start being proactive. A simple 13-week cash flow forecast is your financial radar.
It doesn't have to be complex. A basic spreadsheet listing your expected income and expenses week-by-week for the next three months will do.
This simple document highlights upcoming shortages or surpluses before they become a crisis. If you see a big supplier bill is due in six weeks but you have low expected income, you know today that you need to start chasing overdue invoices more aggressively or defer a non-essential purchase.
Step 4: Build a Cash Flow Buffer
A cash flow buffer is your business's emergency fund. This is your ultimate safety net.
Aim to have at least one to three months' worth of operating expenses sitting in a separate, easily accessible bank account. This isn't money for spending. It's a buffer for the unexpected:
A major client pays late.
An essential piece of equipment breaks down.
A sudden downturn in sales during a slow season.
This buffer is the difference between panicking and calmly finding a solution. It provides the core stability and reliability every business owner craves and deserves.
From Data to Decisions: How Aevum Accounting Can Help
Before you can fix the problem, you must understand it.
Running these systems may sound like a lot of work, but modern tools make it easier than ever.
The Right Tools: Cloud accounting software like Xero, QuickBooks, and MYOB is your best friend. They provide real-time snapshots of your cash flow, track who owes you money, and automate many of these processes.
The Right Advice: Knowing when to ask for professional help is a sign of smart business ownership, not weakness.
At Aevum Accounting, our team, under the guidance of owner Ben De Rosa, doesn't just prepare your tax returns. We offer comprehensive Business Coaching and Advisory services.
We can help you set up and optimise your accounting software, interpret your financial reports, build your first cash flow forecast, and develop forward-looking strategies for sustainable growth. If you're tired of stressing about your bank balance, it's time to get a clear plan.
Take Control of Your Cash Flow Today
Don't let a "profitable-but-broke" business hold you back. Take the first step towards financial clarity and confidence.
Disclaimer: The information and strategies shared in this article 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 at Aevum Accounting.
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