If you’ve been running your business for a number of years, you’ll probably recognise that there are periods when it requires more attention than it once did.
The work is still coming in, your team is busy, customers are being looked after, yet cash flow feels tighter. By then, BAS is approaching, supplier accounts are taking a little longer to clear and now you’re spending more time thinking about upcoming payments than the opportunities for the business ahead.
These points are often raised in the conversations we have with established business owners. While cash flow is often the issue that gets addressed first, there is usually something driving that pressure before it reaches the bank account, and figuring out what it is tends to change the whole conversation.
How Cash Flow Pressure Usually Begins
A pattern we see often starts somewhere unexpected. GST is collected from sales, while PAYG withholding and superannuation obligations build as wages are paid. Those amounts generally aren’t paid until a quarterly BAS is lodged, which means the funds can sit in the business account for some time. It’s easy to begin viewing that money as available working capital, even though it’s already committed.
When cash gets tight, it’s often the first point a business addresses, with every intention of catching up once trading picks up. It’s an understandable decision, and one most business owners find themselves making more than once. But when the pressure that made cash tight in the first place hasn’t eased by the next quarter, the same challenge resurfaces, and the amount owing to the ATO grows a little each time.
If the debt continues to build over time, it can begin affecting other areas of the business. The ATO may contact the business to discuss the outstanding balance and, depending on the circumstances, it can also influence conversations with lenders or suppliers. Addressing the issue early generally provides more flexibility and a broader range of options while the business remains in a stronger position.
Supplier relationships often follow the same pattern. In one matter we worked on, an electrical business had built up half a million dollars owing to a single supplier, just by maintaining the relationship a little longer each time cash was tight. Once that credit limit was reached, the business moved to a second supplier and, quite reasonably, kept trading while working out a way through, and began building debt there too.
Whether that pressure first appears through the ATO, supplier accounts or increasing reliance on finance, those are usually symptoms rather than the underlying issue. Understanding what has changed within the business often provides a clearer path towards improving cash flow.
The Cost of Underpriced Products and Services
One of the most common assumptions is that tighter cash flow means the business needs more sales. While additional revenue can certainly help, in our experience, the issue usually sits within profitability rather than volume.
A simple version of this: a business buys a product for $10 and sells it for $15, and it looks like $5 has been made. But that $5 rarely accounts for the postage or transport it took to deliver it to the client, or the other overheads running quietly in the background.
We see this across all kinds of businesses we work with, not just product resellers. Individual jobs or products look profitable right up until every cost is properly considered. Freight. Labour. Delivery. Overheads. Indirect operating costs. Once those costs are allocated accurately, the margin appears differently.
The business hasn’t become less capable. It simply doesn’t have the level of profitability everyone assumed, and cash flow is usually the first place that difference becomes visible.
Instead of asking “How do we improve cash flow?” the more useful question becomes “What’s reducing profitability?”
What a Business Health Check Reveals
This is where our process begins. Instead of just focusing on the immediate pressure, we take a step back to understand how the business is performing overall.
We begin with a Business Health Check. We review the commercial drivers influencing performance, including:
- gross profit margins
- pricing and cost structures
- employee costs relative to revenue
- working capital
- debt levels
- financial reporting
- operational performance
- industry conditions
Looking at these areas together helps us understand whether cash flow pressure is being driven by profitability, pricing, cost control, debt, operations or a combination of several factors. The objective is to understand where the business is performing well, where pressure is building and which improvements are likely to have the greatest commercial impact.
The Next Steps Taken Once the Underlying Drivers Have Been Identified
Once those underlying drivers are identified, the next step is creating greater visibility across the business.
One practical approach we often recommend is a rolling 13-week cash flow forecast. Rather than relying on today’s bank balance, it provides a forward view of expected receipts and payments over the coming three months. As each week passes, actual results replace forecasts, creating an increasingly accurate picture of the business, allowing owners to identify potential shortfalls before they become immediate problems.
Combined with regular reviews of margins, pricing, working capital and operating costs, it creates a much stronger foundation for decision-making.
From Financial Clarity to Confident Decisions
One message consistently emerges across the businesses we work with: the earlier pressure is understood, the more options are usually available.
That may include strengthening pricing, improving margins, reducing unnecessary costs, restructuring debt, renegotiating creditor terms, extending banking facilities or improving working capital management. These options tend to stay easier to access earlier on, and gradually become harder to arrange the longer the pressure continues.
A tighter month here and there is a normal part of running a business. What tends to help most is understanding why it’s happening, so you’re able to make decisions based on a clearer picture rather than the bank balance alone.
At AS Advisory, we help established business owners look past the immediate numbers to identify the commercial factors influencing performance, improve financial visibility and develop practical strategies that strengthen their business over the long term.
A confidential conversation can help you gain a clearer understanding of where your business stands today, what may be driving the current pressure and which practical opportunities are available to improve your financial position.
👉 Schedule a confidential conversation with AS Advisory.