Liven Up Your Cash Flow Cycle and Improve Business Performance

My work has exposed me to significant experience in accounting and bookkeeping Brisbane businesses. My exposure to actual business setup proved to me the accuracy of the business principle that a sustained positive cash flow is synonymous to the liquidity of a business. The fast turnaround of company assets indicates its robust business operations and profitability. Business assets are intended to be used and turned into profits, not to be kept idle.

A positive cash flow indicates more cash are coming into the business than what is going out. Aside from the positivity of your cash flow, you also need to look into your cash flow cycle, or the length of time needed to turn assets to generate profit. The cash flow cycle starts from the time you spend money to purchase inventory or manufacturing materials and ends when the goods are bought and paid for.

Manage Receivables

Take a good look into your receivable accounts. Do you see a lot of overdue accounts? How soon do you invoice? What percentage of the accounts is paid on time? Manage your account receivables by implementing an aging schedule of accounts. This will classify accounts as they near and exceed due dates. With an aging schedule, you will also be able to determine clients who are able to settle accounts on time and those that habitually fall behind schedule. You can concentrate on the delinquent accounts and apply more aggressive collection efforts.

Work with your Brisbane bookkeeper to design a viable AR aging schedule for your business. If your biggest customers are also your worst payers, it is time that you revise your account terms, collection policies, or client connection. A good and positive way to encourage payments of accounts is to provide incentives for early payments. Also remember that maintaining a good customer relationship can help facilitate a positive payment turnaround.

Manage Payables

Better management of your business dues can also help improve your cash flow. Payables should all be paid on time. Falling behind your payments will not help your cash flow; instead, it will ruin your business creditability. It is important to maintain a good credit standing, else, you risk losing suppliers and creditors. This will also mean additional expenses as you accrue interest and other penalties.

To manage your payables, make sure that you pay bills as they are due, not before. If you cannot pay all payables due, prioritize those that impose higher penalties. It is also important that you review your ability to meet payments before taking in big loans relative to the feasibility of the expense. If you are borrowing money for an expansion that will increase your bottom line by 50% might make the loan feasible, but not if you will be using the proceeds to build an office building that will not contribute to the business’s profitability.

Manage Inventory

Inventory is assets stuck in your warehouse. It is good to have ready stocks in anticipation of sales, but securing and keeping your inventory in good condition adds up to your overhead expenses. It is of good business sense to buy in bulk to take advantage of lower prices. Before stocking up, look into the expense of storage compared to the savings you get.

A Japanese innovative inventory model, the just in time (JIT) model, subscribes to the principle of keeping its inventory level as close to zero as possible. Stocks, parts, and manufacturing items are delivered when needed and demanded. It effectively eliminates costly storage. Consult with a good accounting and bookkeeping firm from Brisbane (Link Bookkeeping!) to determine if JIT can be applied to your business.


Market forecasting is an important factor to any business. Even established businesses continue to gauge marketability and performance. Good forecasting will effectively help you manage your cash flow. You can plan for expenses according to what you can afford to pay, and generate the right amount of inventory to sustain demand. It also means better guide to hiring or downsizing, asset acquisition, and risk management.

To determine if your business is performing, determine your industry’s average cash flow cycle. If your business takes longer to convert a profit than the average cycle, it is recommended that you consult with experts from your reliable Brisbane bookkeeping and accounting firms. They can help you determine roadblocks to your cash flow cycle and devise a better and more effective system.