Small But Mighty
A business can look busy, report a profit and still struggle to pay its bills.
The problem often comes down to timing. Customers pay after the work is completed, suppliers want payment before stock sells, and wages fall due regardless of what has arrived in the bank.
In a tight economy, those gaps become harder to absorb. Better small business cash flow management starts with knowing when money will move—and making deliberate changes to that timing.
Understand the difference between profit and cash flow
Profit measures income against expenses under your accounting approach. Cash flow tracks money entering and leaving your business.
Imagine completing $20,000 of work in October, with payment due in November. You may have earned revenue, but you still need cash to cover October’s costs.
This is why your profit and loss report and your cash flow forecast answer different questions. Review both.
Build a rolling 13-week cash flow forecast
A weekly forecast gives you a practical view of the next three months.
Start with your available opening balance, then record expected cash receipts and payments for each week.
Include:
- Customer payments based on realistic collection dates.
- Wages and other employment costs.
- Rent, utilities and subscriptions.
- Supplier payments and stock purchases.
- Loan repayments.
- Tax obligations and owner drawings.
Calculate each week’s closing balance and carry it into the next week.
Update the forecast weekly. If a customer delays payment, move the receipt to its new expected date rather than leaving an optimistic figure in place.
Make invoicing part of delivering the work
An invoice sitting in your drafts cannot be paid.
Invoice as soon as the agreed billing milestone is reached. Before sending it, check the customer’s billing details, purchase order requirements and approval contact.
Make the invoice easy to process, with a clear description, due date and payment instructions. Agree payment terms before starting work so customers understand when payment is expected. Australian Government guidance identifies clear payment terms as an important part of getting paid on time. business.gov.au
For longer projects, consider deposits or progress payments where appropriate and agreed. This can reduce the amount of work your business finances before receiving any money.
Create a consistent overdue-payment process
Following up unpaid invoices should be a routine task.
Set reminders before and after the due date. If payment remains outstanding, contact the person responsible and ask for a specific payment date.
Record the response and follow up when promised. Where a customer repeatedly pays late, review whether their existing credit arrangements still suit your business.
Before pausing services or introducing fees, check the agreement and obtain advice where needed. Clear boundaries work best when they are established in advance.
Stop buying stock solely for the discount
A bulk order can offer a lower unit price while creating a bigger cash problem.
Consider how quickly the stock will sell, the storage cost and what happens if demand is weaker than expected.
For example, saving $400 through a larger order may be poor value if it ties up an extra $5,000 needed for payroll.
Review slow-moving items, reorder quantities and supplier lead times. Smaller, more frequent orders may suit some products better, even if the unit price is slightly higher.
Match spending to the cash you actually have
Review recurring expenses individually. Check whether subscriptions are used, services overlap or contracts no longer reflect your needs.
For larger purchases, ask:
- What cash benefit should this create?
- When should that benefit arrive?
- Can the business cover its obligations while waiting?
Negotiate supplier terms before committing to expenditure. Business.gov.au recommends reviewing expenses, customer payments and supplier arrangements as part of improving cash flow. business.gov.au
Separate money committed to future obligations
Your bank balance may include money needed for tax, payroll or other upcoming payments.
Consider separate accounts or clearly tracked allocations so those funds are visible. Ask your accountant to help calculate suitable provisions for your circumstances.
Treat the remaining available balance as your decision-making figure.
Establish a short weekly cash review
Set aside 20 minutes each week to check overdue invoices, upcoming payments and the forecast’s lowest balance.
Choose one action from the review: collect an outstanding payment, adjust an order or defer a nonessential purchase.
If the forecast repeatedly shows obligations you cannot meet, seek qualified advice early. Better information gives you more time to make workable decisions.
Find more guidance in Small But Mighty’s Finance section.