Let’s talk cash flow – the lifeblood of your business.
Even if you’re turning a profit on paper, running out of cash can stop your business in its tracks. It’s one of the most common issues we see with small business clients, and the good news is: it’s usually avoidable with a few simple habits and smart planning.
Here’s how to stay in control and keep your cash flow running smoothly.
First things first – what is cash flow?
Cash flow is the money moving in and out of your business.
- Money in: Sales, client payments, interest, or funding
- Money out: Rent, wages, subscriptions, supplier bills, equipment, tax
It’s possible to have a profitable business and still run out of cash – especially if customers are slow to pay or expenses creep up without warning.
Why it matters
If you don’t have enough cash on hand, you can’t pay wages, suppliers, or the ATO – even if the income is “on its way.” We’ve seen solid businesses get into trouble simply because they didn’t have visibility over when money was coming and going.
Think of cash flow like breathing – your business won’t survive without it.
Our top tips to avoid a cash flow crunch
1. Invoice quickly, and set clear payment terms
Don’t delay! As soon as a job is done, get the invoice out. Consider using shorter payment terms too – for example, 7 or 14 days instead of 30, or avoiding “20th of the following month” terms where possible. The quicker you ask, the quicker you get paid.
Real-life tip: One of our tradie clients shaved their average payment time from 42 days down to 18 days just by switching to 7-day terms and sending friendly auto-reminders
2. Follow up on late payments (don’t be shy)
It can feel awkward chasing money, but late payments impact your ability to pay your own bills. Use polite, consistent follow-ups and consider small late fees or early payment discounts to encourage prompt payments.
Pro tip: Set up automated reminders in Xero – it removes some awkwardness and saves time.
3. Keep your expenses in check
Review your spending regularly. Are there tools or subscriptions you no longer use? Can you renegotiate with suppliers or reduce unnecessary overheads? Every dollar saved helps improve your cash position.
Quick win: One client was surprised to find they were paying for four different software tools that all did the same thing. Consolidating saved them over $300/month.
4. Build a buffer
Aim to have at least 2–3 months of operating expenses set aside. It might not happen overnight, but even a small cash reserve can give you breathing room when unexpected costs pop up.
Pro tip: Do yourself a favour and check out the Profit First system.
5. Forecast your cash flow
A 12-month cash flow forecast helps you spot trouble before it happens. You’ll be able to plan for tax bills, staff bonuses, slower sales periods, or big purchases. Update it regularly. We recommend weekly, but even monthly or quarterly is better than nothing.
Need help? We build cash flow forecasts for many of our clients. It’s one of the most valuable tools you can have.
6. Keep stock levels lean
Too much inventory ties up your cash. Review your turnover regularly and avoid over-ordering slow-moving items. Think “just in time” instead of “just in case.”
7. Focus on repeat business
It’s easier (and cheaper) to sell to existing customers than chase new ones. Consider loyalty discounts, bundled packages, or just great service that keeps people coming back.
Example: A local café we work with introduced a pre-paid coffee card. Not only did it boost cash flow upfront – it kept regulars coming back each week.
8. Diversify your income
If one part of your business slows down, having another stream of income can keep you afloat. Could you add a digital product, a subscription service, or sell your expertise online?
9. Improve efficiencies
Can you automate admin tasks, streamline job management, or reduce waste in the business? Time is money, and small gains in efficiency can make a big difference to your bottom line.
10. Talk to your suppliers
Open conversations can lead to better terms – like extended payment windows, bulk buy discounts, or split payments. You won’t know unless you ask.
Final thoughts
Cash flow problems can sneak up quickly but with a bit of structure and a few smart systems, you can stay ahead of the game.
At Blackwood Bookkeeping, we’re here to help you keep your finances crystal clear. Whether it’s building a custom forecast, chasing down late payers, or reviewing your expenses – we’re in your corner.
Need a hand? Reach out to our team. A quick chat might be all it takes to avoid your next cash flow crunch.
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