5 Ways to Improve Your Small Business Cashflow

Cashflow is something that is the lifeline for small businesses.  Having started out as a corporate tax accountant, I was always trained to focus on the Profit and Loss (or Cash Statement) and the Balance Sheet. 

However, cash really is the health check of any business.  Your accounts can look very healthy.  However, if you don't have cash available to pay for things, then that becomes a big problem.

Because many of us have never been taught how to manage money, it often means that managing money within your business can be equally, if not more, challenging.

There are a number of ways to both track and improve your cashflow.  Here are 5 ways that you can do straight away (I suggest speaking with your accountant about some other ways to manage your cashflow as well, so you get advice that is specific to your situation).

1. Review your business plan

If you don't yet have a business plan, I highly recommend you stop here and create one.  There are all sorts of templates you can find online to help you.  The purpose is to help you clarify your brand message, your target market (and niche), your marketing approach, and the financial goals that you have for the current financial year.  This can then be broken down into months or quarters.  

Once you have these goals, it's easier to put a plan into place to make sure you reach these goals. 

That is what this first step is about - reviewing those goals and seeing whether you are on track.  

Once you have this visibility, you can look at what your income has been to see how it aligns with your goals.  If it doesn't, then now is the time to adjust your plans and get back on track!

2. Streamline the Systems you use

All businesses need systems of some sort.  The bigger your business, the more likely it is that you need more robust systems - an accounting system, a CRM (Custome Relationship Management) system.  As much ability to automate as possible.

Then come all the applications!  I know for me, I use Kajabi, Zoom, Calendly, Trello, Canva, Kapwing, Capcut, Audacity, to name a few.  I regularly look through all the apps I use to see if any are not necessary, or if there is an app out there that can do a few tasks, rather than me having a single app that only does 1 thing.  It's easier to keep track of when using, and it's often less expensive, as each app costs.

Take a look through what you use and pay for and see if there is an opportunity to reduce and streamline.

3. Look at your Cashflow, Monthly

Very often I see clients who, if they look at their cashflow at all, it's once a year when their accountant sends them their tax return information.

You definitely need to be tracking your cashflow at least monthly.

Your accounting system should be able to give you this information.  I like to use a spreadsheet to track both my business budget and cashflow on a monthly basis.

That way you can see trends and when you are most profitable and when you are least profitable.  Once you know this, you can make decisions about what products and/or services to promote more of in a month where revenue is down.  

This information makes decision making SO much easier.

4. Put Money Aside for Tax

Tax is one of those things that we all have to pay.  It is also a good indicator that your business is making money, as you only pay tax when you are earning more than you are spending.  That is a good thing - really.

Speak with your accountant about how much tax you need to pay each month or quarter, and make sure you put that cash aside, into a separate account.

Remember also to pay withholding tax and superannuation for your employees and potentially contractors.

5. Save for Overflow Cash

What is "overflow cash" you might be asking?  Well, it's for those months where you have more bills than usual, and they can potentially put you in a loss position for that month.  If you don't have the revenue to pay all your expenses that month, you need to be saving for this each of your other, profitable months.

That way you won't need to rely on a bank overdraft.

Once you see your monthly cashflow, it makes figuring out this overflow cash amount easier.  Then you can apply a percentage to your revenue each month and put that into a separate bank account - for example, you could put 10% of your revenue into an "Overflow" account.

I hope these 5 cashflow improvement ideas help you!