In this article I hope to shed the light “ungeek”  the term “cash flow”. We will discuss “cash flow” under the following headlines.

What is Cash Flow

Why is Cash Flow so important?

Top Tips from UFirst Bookkeepers

Cash Flow Template

What is cash flow

Cash Flow is the movement of cash within the business.

There are 2 ways cash can flow into a business

  1. Cash Inflow
  2. Cash Outflow

Cash Inflow

When cash comes into the business we have a cash inflow

  • When you provide a service and a customer pays for it.
  • A customer pays for a meal in your restaurant
  • A client pays for their haircut
  • When you sell your stock and get paid

   Cash Outflow

When cash goes out of the business we have a cash outflow. Examples include:

  • When you pay wages and salaries
  • When you pay your creditors
  • When you buy stationery
  • When you buy a new computer

Why is Cash Flow so important


  1. To build a profitable business

When the cash coming in is less than the cash coming out the business is running a loss.

Statistics indicate that being paid late is one of the biggest contributors to cash flow stress.


  1. Better planning

A cash flow forecast will help you identify potential cash shortfalls and help you manage your outgoings so that you do not get into a cash crunch.

 Knowing when money is coming in and when it is going out will help you to plan and make better decisions for your business


  1. More resources to expand your business

Positive cash flow can mean more resources to expand with or invest in new ventures for your business


  1. Stay ahead of trends and keep up with  competition

Cash flowing positive means you are in a better position to keep up with current trends


  1. Maintain good relationships with your suppliers

Positive cash flow means you can pay your suppliers. Keeping good relationships requires a good management of the money you owe them and when you pay them.

See our article on managing your accounts payable.

Maintaining a cash flow will let you know when you should or should not be ordering.

Timing your receipts and payments will ensure that you keep good relationships with your suppliers.

UFirst Bookkeepers Top Cash Flow Tips


We have gathered these tips from our own experience but mostly from the businesses who we have the opportunity to work with and see how they are running their operations successfully.

  1. Cash Flow Forecast

Do a cash flow forecast regularly and update it with any new outgoings and incoming cash flow.

  1. Be Realistic

Unless there have been concrete changes be realistic. Use last year’s figures with an adjustment for inflation or business environment

  1. Reconcile actuals versus forecast

If you also create a budget you can do a variance analysis. Variance means differences. If you had a budgeted $200 for a telephone bill but end up paying $1000. You will have a negative variance on your telephone account. Find out why the bill was high? Was your forecast out? Correct this so that your cash flow forecast provides you with a realistic estimate.

Reconcile this cash flow with another tool such as a system generated report such as an open invoices report in QuickBooks Online.

  1. Bank Reconciliations

Do your bank reconciliations often This is part of knowing when and how much cash is coming in and when and how much cash is going out of your business.


  1. Do an accounts payable aging analysis

One of the most common mistakes we make in business is not having a proper handle on when and what bills are due.

Stay on top of your bills. Know who you owe money and when it is due. See our article on managing your accounts payable.

  1. Do a receivables aging analysis

Know who owes you money and when they are likely to pay. See our article on managing your accounts receivable to help your cash flow.

  1. Manage your inventory existing and incoming

Pay attention to slow moving inventory or stock. Consider offering discounts or discontinuing certain products. Your operation cycle and your cash flow forecast will be useful tools to determine what and when you need to order.

  1. Do Accounting ratio analysis
  2. Manage your government liabilitiesYou may have heard the saying that there are two things in life that are certain: death and taxes.This is certainly true and part of our cash flow diligence as business owners should be to make sure we have enough money  to pay our government obligations.Most business end up having to pay penalties for late payments or failure to submit returns.

    If you are registered for GST you normally get back the tax you paid on business expenses.

    Set aside a percentage towards obligations such as wages, quarterly government and other liabilities such as Superannuation, PAYG wtax, PAYG income tax and GST.


Do you feel like  you do not have a grip on your cashflow? Book  your free Business Discovery session here.


All information provided in this article is of a general nature and is not intended to be business or personal financial, tax or investment advice. Also, as changes in legislation may occur frequently we recommend that you contact us for our formal advice where it is within the scope of our services or an expert before acting on the basis of this information.

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