Cash flow management tools to boost your small business

Small businesses, particularly sole traders, face challenges in achieving long-term sustainability in Australia.

Of the small businesses with employees already established in June 2019, 25% were out of action by September 2023, according to the RBA. Among sole traders, 40% were no longer operating.

Admittedly, it’s been a sober time, with weaker demand, rising costs and difficulty in finding suitable labour all weighing heavily on all small businesses.

However, most business failures result from poor management and inadequate cash flow, says small business accountant Leanne Hume at Sydney-based Simply Numbers.

“You may have an excellent product or service but if you don’t have enough cash or you’re not managing your cash well enough, you won’t succeed,” she says. “Without careful management and planning, the majority of small businesses will fail.”
Predicting what cash you’ll have coming in and going out over the next 12 months is crucial. Here are some tools and tricks to keep you on track.

Cash flow management forecast tool

Tracking and forecasting cash flow should be a priority for any business owner, whether you’re in hospitality, retail, professional services, construction or beyond.

Managing cash flow allows you to estimate how much money will be available to your business going forward and work out how much money your business needs to cover debts. It can also help you spot trends and tackle any cash flow issues before they become a major crisis.

Our cash flow template is a quick and easy solution to your cash flow forecasting needs, featuring:

Instant calculations

• Multiple payment types
• Coloured alerts for when cash balances fall below a minimum threshold
• Monthly insights on your incomings and outgoings
• A ‘living’ business plan that changes as you grow

Profit and loss projection too

How much money will your business bring in over the next 12 months? What big (and small) expenses are you facing? Will you be investing in new equipment or staff?

Our profit and loss projection tool helps you accurately forecast the year ahead by:

Helping you monitor current activity with a few quick expense calculations for the month

Developing projections, sales targets and pricing for goods and services into the future

Using the results to tweak your business model for even greater financial success

Your existing accounting software

All accounting software, plus add-ons or integrations, offer insights and tools to help you manage cash flow. If you’re only using it to automate invoicing and record expenses, take another look at the available data, reports and tools that can help you go beyond the basics.

Leanne says most small businesses and sole traders don’t use their accounting software to its best ability.

“Most accounting tools will clean up your data, measure your KPIs – such as how quickly you need to turn over your stock and which invoices are being paid on time – plus track your patterns and alert you to potential issues that may negatively impact your business.”

Because these tools are already integrated into accounting software such as Xero, Quickbooks and Sage, most small businesses don’t need to purchase add-ons.

But for scaling or larger organisations, forecasting apps such as Spotlight, Fathom and Calxa all integrate with Xero and provide long-term cash flow forecasts.

“Add-ons give more granular and detailed information, and as you grow it’s wise to have that at your fingertips,” says Leanne.

Most accounting software platforms provide free tutorials to help you understand and take advantage of all of the features available. A one-off session with an accountant or bookkeeper can also get you set up with advanced accounting software options.

Low-tech cash flow management tips

While tech tools are great, it’s important not to overlook the basics of cash flow management. Tips to stay cash flow positive include:

• Keep personal and business accounts separate.
• Spend wisely.
• Stay on top of stock management.
• Build a cash reserve.
• Keep the books up to date and invoice promptly.
• Stay on top of requirements in terms of council, insurance, registrations and tax.
• Have clear payment terms and conditions.
• Be consistent with marketing efforts.
• If you get stuck, ask for help – an accountant can help you understand how cash flow is impacting your business.