Cash Flow Planning

Cash Flow Planning
You need CASH FLOW to live, …….. run your business and…… pay for the things in life you value, which by extension includes all of the peeps living in your home.
This is a reminder, in challenging times, to keep on top of your cash flow planning.

People generally view cash flow incorrectly, because they consider it on a daily and historical basis.

Cash flow today is a result of decisions/actions taken historically, and in reality some time ago.

So the way to view cash flow EFFECTIVELY is to plan it for tomorrow and further into the future.

Each business has varying lead and lag times but all business cash flow outcomes are a result of the utilisation of its resources.

Examples of cash flow planning essentials?

  • How will current sales grow?
  • Can you obtain better supplier terms (Price, payment terms, reduce the necessity for stock holding)
  • What is your Gross Profit percentage?
  • Can you reduce “soft” expenses?
  • How do you commit to critical expenses?
  • How are you taking your funds out of the business?

A cash flow relies upon internal and external factors, some of which you can control and others not. Both internal and external factors rely upon assumptions, and it is these that drive your results as you can see from the few examples noted above.

The Usual Reasons Why People Don’t Prepare Cash Flows

  • It’s too hard – Really!
  • It’s out of date the day after completion
  • I have it in my head and I know where I am going
  • It’s only required by the bank and I don’t pay any attention to it.

These arguments simply indicate a lack of understanding of how the drivers work, and why banks think a cash flow is so important?

The reason a cash flow is so critical is that it is basically a business model presented in a mathematical format.

Every number in a cash flow has some logic as to why it is there and how much it is. Its starts with income, less trading and operational expenses which produce a cash surplus.

Having a written cashflow enables monitoring of your key drivers and adapting your decisions and strategy, which leads to ultimate effectiveness.

Having it in your head means it’s out of reach and you’re not holding yourself or anyone in the organisation accountable.

Ultimately it’s a better way of clearing your mind of clutter and creating space to be more creative in your business.

The ultimate success of an effective cash flow is the ability to draw funds from your business for the things you dream to pay for.

Of course, being a projection it is rare the cash flow plan pan’s out exactly. By analysing the variances you can change the underlying assumptions/decisions and take remedial actions to move you closer to the planned outcome. If something is not working you change the action and if something is going well you continue to exploit that opportunity.

So cash flow planning for the future delivers continuous improvement and if you are measuring and reacting on a 30-day basis, you cannot fail but to make better-informed decisions that deliver the optimal result.

Use the attached hotspot link to prepare your business cash flow to deliver your desired outcomes and critically what needs to be done to achieve them. That’s a (CASH FLOW) plan.


Or contact our accounting team to assist with your cash flow planning and success.

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