Just as blood carries oxygen and nutrients throughout the body, cash flow transports money to all parts of a business, enabling day-to-day operations, investments, and long-term expansion. Quite simply, cash flow is the lifeblood of business.
Even profitable businesses can fail if they run out of cash. As a company grows, so does the complexity of managing cash. And while revenue may be increasing, expenses and capital requirements often grow even faster, adding new layers of risk.
As expert financial controllers helping companies nationwide, we’ve seen how poor cash flow management has disrupted even profitable businesses from paying bills, meeting payroll, or funding growth. We’ve also helped these businesses regain stability, restore liquidity, and position themselves for sustainable expansion. But cash flow management shouldn’t become a priority only when your back is against the wall, to help your business stay ahead we’ve outlined seven essential principles to strengthen your cash position and give your growing business the best chance of long-term survival.
How Poor Cash Flow Management Hurts Businesses
Numerous studies highlight that cash flow management is one of the most critical issues facing businesses today. A Blackline survey found that nearly 49% of finance professionals worry about the reliability of their cash flow data, while 85% of small business owners say it is their top financial priority.
Prioritising cash flow management in your business is a key step in avoiding some of the most common downfalls that occur during business growth, such as:
- Making critical decisions without a clear view of available funds
- Missing supplier payments or struggling to meet payroll
- Delaying or abandoning growth opportunities due to cash constraints
- Taking on unnecessary debt and incurring higher financing costs
- Damaging relationships with suppliers, lenders, and other stakeholders
Our 7 Tips for Cash Flow Management Success
1. Understand Your Cash Flow Drivers
Identify exactly what drives cash in and out of your business; this is the foundation of effective cash flow management. A strong business model and operational efficiency are essential, but positive cash flow is what keeps the lights on, regardless of on-paper revenue.
Key questions for understanding your cash flow:
- Do customers pay before or after delivery? Understand that payment timing affects how much cash you have available to cover expenses. Pay attention to how and when this cash is coming into your business.
- Are suppliers demanding upfront payment, or offering credit terms? These terms impact how long you can hold onto cash before paying out, impacting your liquidity.
- What does my cash conversion cycle look like? This measures the time between spending cash and receiving it.
Word of warning: During growth phases, inventory, accounts receivable, and accounts payable can consume cash at a rapid pace. Ensure that you remain aware of this while measuring your cash conversion cycle. Use a tight budget and a robust cash flow forecast to manage this actively.
2. Utilise Frequent Cash Flow Forecasting
Great cash flow forecasting supports better decision-making. If revenue comes in lower than expected, you need to know which cost levers to pull and where you can pivot.
Create rolling forecasts (weekly or monthly) that extend 6 to 12 months out. Pair this with scenario planning, the modelling of different “what if” situations such as changes in sales, costs, or timing that would affect your cash position. This is a method used by major ASX and Fortune 500 companies to stay ahead, with companies like Shell having this implemented since the 1960s to prepare for volatility.
As growth usually demands investment in equipment, people, or systems, incorporate these plans into your forecast so you can anticipate capital needs and avoid unexpected cash strain. Pay particular attention to CAPEX and resource allocation as these can create significant cash burdens if not managed well.
3. Manage Working Capital
Strong working capital management is essential for maintaining liquidity and protecting your business’s overall financial health. To manage capital efficiently, focus on these key goals:
- Ensuring short-term obligations are met
- Freeing up cash for reinvestment or debt reduction
- Improving margins and reducing financing costs
- Minimising risks associated with overreliance on external funding
Pay close attention to the balance between accounts receivable and accounts payable, as this is where small changes can make a big difference.
- Tighten credit terms and accelerate collections from customers
- Negotiate better terms with suppliers to extend your payment window
Pro tip: Break down forecasts on a weekly basis to spot timing bottlenecks before they cause problems.
4. Align Growth with Cash Availability
Remember: Revenue growth ≠ cash flow growth. Expanding too quickly without the funding to sustain it can create serious cash strain and even stall your business.
Keep growth in check by:
- Sticking to a disciplined budget and,
- Scaling at a pace your working capital can support.
The focus should be on profitable growth, not just boosting top-line revenue. To improve the profitability of your business, focus on:
- Improving scalability without overextending resources. Many successful businesses, for example, outsource non-core activities like IT or customer support to preserve cash and maintain flexibility.
- Clear growth objectives. Growth objectives such as entering a new market, launching a product, or increasing market share help drive your business forward.
At all stages, ensure your team is fully aligned and informed with your goals.
5. Secure Flexible Financing
If your forecast reveals a future cash crunch, don’t wait; arrange funding before you need it. Having flexible financing in place gives you the ability to cover short-term gaps, seize growth opportunities, and avoid making rushed decisions under pressure.
Consider financing options such as:
- Credit lines or working capital loans. Ideal for covering seasonal fluctuations or short-term expenses.
- Equity financing. Can provide significant capital but involves ownership dilution and potential control trade-offs.
- Alternative financing, such as:
- Invoice factoring
- Revenue-based financing
- Supplier financing
Real World Examples: Under Armour secured financing to scale during its growth phase, while Airbnb relied on credit cards in its early days. The best option will depend on your business stage, structure, and growth plans.
6. Invest in Financial Expertise
A strong CFO or financial leader can make a critical difference during periods of growth. They bring financial discipline, improve decision-making, and ensure your business is well-capitalised and ready for the future.
Even if you don’t need a full-time CFO, engaging a fractional or outsourced CFO (like one of our expert team members) during rapid growth or transformation can provide the strategic oversight needed to avoid costly mistakes.
7. Upgrade Your Systems
As businesses grow, outdated accounting and operational systems can become a serious bottleneck. Eventually, you’ll need to invest in replacements.
When it’s time to update your systems, proceed carefully. Gartner reports that between 55% and 75% of ERP implementations fail to meet expectations, often because the project lacks clear objectives or stakeholder buy-in. Once trust in financial data is lost, the impact can ripple across the entire business.
Modern CFOs often lead digital transformation, ensuring that technology investments align with strategy and deliver real value.
Does Your Business Have a Heartbeat?
Managing cash flow in a growth environment is like conducting a symphony, every moving part needs to work in harmony. If cash flow is the lifeblood of your business, the CFO is its heartbeat, regulating health, enabling smart decisions, and driving sustainable success.
At Your Financial Controller, we provide the financial leadership to keep that heartbeat strong, whether through outsourced CFO services, cash flow management, or strategic planning.
If you’re ready to give your business the clarity and confidence it needs to grow, let’s talk.
