Cash flow basics every Australian small business should know

Plenty of profitable businesses still run into trouble — because profit and cash are not the same thing. You can be owed a fortune on paper and still struggle to pay this week's bills. Managing cash flow is really about managing timing: when money comes in versus when it goes out.

Know your cash cycle

Every business has a gap between spending money (materials, wages, tools, time) and getting paid for the work. The longer that gap, the more cash you need on hand to bridge it. Map yours: how long from quote to job, job to invoice, and invoice to payment? Shortening any of those stages frees up cash.

Invoice promptly and chase early

Slow invoicing is self-inflicted cash-flow pain. Bill as soon as work is complete, set clear due dates, and follow up the day a payment becomes overdue — politely, but promptly. A statement of account with aging buckets makes it obvious at a glance who to chase.

Take deposits and bill in stages

For bigger jobs, don't fund the whole project out of your own pocket. Ask for a deposit before you start and bill progress payments at milestones. This keeps cash flowing through long jobs instead of arriving all at once (or late) at the end.

Set aside GST and tax

The GST you collect isn't your money — it's the ATO's, and it's due at BAS time. Many small businesses come unstuck by spending it. A simple habit: move your GST (and a slice for income tax) into a separate account as it comes in, so the bill is never a shock.

Watch your expenses and timing

Track every expense as it happens — scanning receipts beats a shoebox at tax time — and time large outgoings where you can. Knowing your real costs (and your break-even) tells you how much work you actually need to stay ahead.

Build a buffer and look ahead

Aim to keep a cash buffer of a few weeks' expenses for the quiet patches and surprises. Then look forward, not just back: a rough forecast of money in and out over the next one to three months turns nasty surprises into manageable decisions.

This article is general information, not financial or tax advice. See our Disclaimer.

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