Cashflow Management

Checklist Guide


For almost every business, the most important component is access to sufficient working capital.

Cash is critical to business success. While our focus might be on making sales and profit, if this is not translated into cash, our business will go down. 40% of business failures are due to lack of cash.

We need cash to pay our staff on time and keep them happy. We also need to pay our material suppliers, otherwise they may not deliver the items we need to get a job completed.

Having enough cash in the bank means that cashflow problems do not become a distraction which takes us away from other important issues of running the business.

Some of the most profitable businesses have been brought undone by having limitations on their working capital; during growth phases, acquiring new businesses or when the market changes.

When looking for finance; whether to purchase capital equipment, fund growth or manage cashflow fluctuations it is important to understand the range of finance options available so you can select the most appropriate option for your circumstances.


1. We prepare cashflow forecasts monthly to ensure that we understand the Cash position of our business.

Why is this item important?

We need to know if we have enough cash to service our commitments. Can we meet payroll this week? Do we have enough cash to pay our suppliers and meet our other expenses? The preparation of the forecast will give you projected numbers on your Debtors, Creditors and Cash on hand and warn you of any shortfalls that may happen.  This information will give you a warning of Cashflow shortfalls before they occur. You can then take action to manage the shortfall by increasing your borrowings or negotiating longer terms with creditors or asking your debtors to pay sooner.

The Cashflow forecast is our early warning tool of problems in the next month. Given the warning, we can act before a cashflow crisis occurs.

How can I tell if I meet this item in my business?

  • Do we have a written Cashflow forecast in place?
  • Are we making and monitoring our sales forecast?
  • Do we know the Asset/value of Debtors weekly?
  • Do we know the liability our Creditors represent weekly?
  • Are we monitoring the bank balance?

What do I need to do to meet this item? 

  1. You sit down mid-month and prepare your forecast this can be a simple spreadsheet 
  2. You access your accounting system to collect the numbers required to make the forecast
  3. You review the last forecast to see how accurate it was and learn from any miscalculations you made

You do need to understand that forecasting is part Art and Science and you will get better at it over time and it will help give you insights into your business. One of our financial specialists can provide a simple to use template and help you with your first couple of forecasts.  

2. We are fully aware of the various finance options available outside of our current banking facility including asset finance, debtor finance facility and working capital loans

Why is this item important?

We need to have options in our business so we can manage the risk in our business.  Alternative forms of funding give us the flexibility we need to grow and expand and take advantage of opportunities as they arise. Our bank may not support our plans and can hamper our ability to take advantage of opportunities as they can be slow to act. Let me give an example: 

One of our competitors as gone into receivership (due to poor management) this gives us an opportunity to acquire their stock, customer base and staff.  The bank has one thousand questions and will wish to review the security it holds on your assets and will take at least 3 months to decide.

Having alternative forms of funding gives you the ability to borrow the funds needed to take advantage of the opportunity in less than a week 

How can I tell if I meet this item in my business?

  • Do you have more than one bank you deal with?
  • Are your financial and tax returns Up To Date?
  • Are you paying cash for assets that could be financed and hence not maximizing your working capital?
  • Do you have professional advisors who can show you the alternative funding options?

What do I need to do to meet this item? 

  1. Have two banks, one that is your business bank the other your personal bank (do not have all your eggs in one basket)
  2. Request your credit score from one of the providers so you understand how you look to potential lenders
  3. Have your management accounts up to date and pay your tax liabilities on time
  4. Seek the advice of a professional to review your borrowing options every 12 months

We need to understand that in today’s market the banks are no longer the best source of funds for a business and we will need professional advice to seek the best alternative for our business. 

3. We have access to short term funding if we have a cash shortfall.

Why is this item important?

We need to have flexibility in our business so we can take advantage of opportunities and manage risk. We do not know what event or economic change is around the corner so we need to have a reserve or a source of short term funding available (which is hard to do as all our capital is tied in the business). Let me give an example: 

One of our major customers has gone into receivership, this will have a big impact, as the customer is a large debtor. We need funds to manage our cashflow hole and funds to find new customer to replace the revenue lost.

We can call on short term funding to manage this problem for without it the business could be at risk of failing 

How can I tell if I meet this item in my business?

  • We have an overdraft that is not fully drawn
  • Our financial and tax returns are Up To Date?
  • We know our credit score  
  • We have professional advisors who can organise short term funding

What do I need to do to meet this item? 

  1. Plan for the unexpected by having a cash reserve or source of funds
  2. Do not use all your credit facilities at once, keep some in reserve
  3. Get advice as to the best solution for your short terms needs
  4. Maintain a good credit rating
Because things change, we must have a backup plan for a cash shortfall at all times and it is difficult to raise funds during a cash crisis and so having a plan in place and a relationship with a finance professional will protect the business
4. We have spread our funding asset risk across a range of funding options therefore minimising our risk

Why is this item important?

We just cannot trust our banks, recent history has demonstrated this! We have the Banking Royal Commission and the Global Financial Crisis (GFC) as clear evidence of how vulnerable small business is to banks and other lending institutions. We need to manage our risk so that we are not exposed to a change in bank policy or a change in the economy   

How can I tell if I meet this item in my business?

  • We have spread our risk by not having all borrowing with one bank
  • Our Cars and Machinery are financed elsewhere  
  • We have our Home Mortgage, not with our business bank   
  • We use invoice finance when required to increase our working capital

What do I need to do to meet this item?

  1. We look at options outside our bank when we finance new cars and equipment
  2. We will keep our business financing separate from our personal borrowings  
  3. We monitor our overdrafts and use it for short term borrowing only
  4. If the balance outstanding is constant on our overdraft we look at borrowing for a longer-term

One of the biggest risks a business can have is a single source of funding, you would not place all investments in one place so never do the same with your debt. Consult with a finance professional so you are aware of the funding alternatives available outside the banks

5. When making asset purchasing or other funding decisions, we seek appropriate external expertise (accountant/independent commercial finance broker/working capital specialist) to ensure that we are selecting the financing solutions best suited to our needs

Why is this item important?

We need to understand that if we borrow from one Institution (generally a Bank) everything we  have is with them, the House, Factory, Cars, Machinery and Overdraft are all added up to calculate the balance outstanding so they understand the risk you are to them! The more you borrow the greater the risk, so they are more reluctant to provide more finance

How can I tell if I meet this item in my business?

  • We have a detailed plan for funding our business Growth  
  • We have discussed our plans with our accountants and independent commercial finance broker/working capital specialist
  • We spread our debt risk by using several different institutions and types of financing  

What do I need to do to meet this item?

  1. Plan as to what you will need to finance
  2. Seek the advice from independent commercial finance broker/working capital specialist in making your plan
  3. You need to check that you have a mix of short and long-term funding and discuss with your advisers the right mix for your business

The value of the right advice in the complex changing finance market of today can save a business both thousands of dollars in interest and hours in wasted time   

6. We are confident that our accountant or Government Grants advisor ensures that we are fully up to date with any government grants available to our business.
Why is this item important?


How can I tell if I meet this item in my business?

  • We have discussed with our Accountant or Government Grants advisor as to what may be available in Government grants
  • We follow government announcements regarding assistance to a small business or our industry  

What do I need to do to meet this item?

  1. Look at your business and ask yourself what do we do that is innovative or unique and discuss this with your Accountant or Government Grants advisor
  2. Can you export your product or service? If so ask the advice of your advisors as to what may be available?
7. We have a long-term asset purchasing funding plan in place that spreads our funding asset risk across a range of funding options for the future and takes into account asset obsolescence and taxation implications

Why is this item important?

We need to replace the assets we use to produce income these assets can be the delivery ute to complex manufacturing equipment. All of these assets have a service life that can vary from 2-3 years to up 20 to 40 years. We need to plan to replace them as tax effectively as possible with an understanding that we need to keep our debt portfolio as spread as possible

How can I tell if I meet this item in my business?

  • We rent or lease assets that have low tax depreciation rate and we have funded them outside our bank
  • We have a replacement plan for asset and a timetable as to when
  • We discuss our plan with our advisors to look at the best funding options and to understand the tax implications
  • Funds are available should an asset require urgent replacement

What do I need to do to meet this item?

  1. Take an inventory of your income producing assets then estimate the service life to create a replacement plan. (Some assets need replacement when service / maintenance cost become too high)
  2. Now look at the various funding methods by discussing them with your advisor. In some cases supplier based funding can be great value, your bank should be the least favoured option (due to their total exposure calculation)
  3. Have your Accountant look at the tax implication of how you fund the asset


We understand that we need to consult with a finance professional who will advise that you do not pay cash for income producing assets because such assets are easily financed, we conserve our cash for working capital and business growth. 


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