Cash Flow Credit Risk Guest Contribution Small Business
4 mins read

The five cash flow commandments any small business should live by

There’s a reason that you often hear the phrase ‘cash is king’ as a small business owner.

No business, irrespective of its size, can sustain itself without a healthy amount of cash in the bank. Even Tesla, the leading electric car manufacturer and technology pioneer, saw its share price nosedive following concerns its cash reserves were drying up. Proving that cash flow trouble is not just a problem for small businesses.

Here are the top five rules that any small business should live by to maintain a healthy cash flow all year round:

1. Create a cash flow plan and budget

Like the weather, cash flow can be unpredictable and seasonal, therefore it’s vital that you create a cash flow plan and business budget. These will help you forecast revenue and overheads so that you become aware of any potential hurdles before they crop up.

Planning ahead also allows you to make better financial decisions. If you have complete visibility on where cash is sitting in your business, you will be able to ascertain quickly whether you can afford things like extra staff and new equipment.

However, regardless of the amount of planning you devote to your budget, unexpected things will crop up that lay waste to even the most thorough of plans. Any business owner worth their weight will have a cash-contingency plan to keep things running smoothly until things return to normal.

2. Know your ingoings and outgoings 

Ignorance certainly isn’t bliss when it comes to cash flow.  As a small business owner, you need to be acutely aware of both your ingoings and outgoings at all times. It’s easy to become complacent and let the small expenses slip under the radar, but they can add up, fast! If you aren’t diligently recording your business spending, you have no way of knowing if you’re going over budget.

Regularly looking at your overheads and fixed costs, such as rent and utilities can also reveal unexpected ways to save.  By keeping clear visibility on the movement of your money, you can easily pinpoint any unnecessary expenses and trim the fat.

3. Set specific payment terms 

Before starting a job, set specific payment terms for your customers and make sure you stick to them. Set your terms to ‘payment in full upon completion’ so that you are paid as quickly as possible. Don’t extend out to 30 or 60 days after you’ve completed your work, hold firm on your terms and always bill a client immediately.

Aim to issue your invoice within 24 hours after the work has been complete.  This way you’re still top of mind and also minimising the time you need to wait.

In some instances, requesting a down payment or a deposit can be a smart decision.  This will limit the amount that you are out of pocket for larger projects and ensure that half the financial legwork is done first up.

4. Chase late payments 

No one likes to feel like a debt collector, but not following up on invoices can stop your cash flow dead in its tracks. Have a collection process in place and make sure you follow through to limit the time you spend waiting for slow payers.

If necessary, implement penalty charges for late payments to encourage customers to pay on time.  Be transparent about any late payment terms upfront, as you don’t want to surprise any customers with them.

Make it a habit to review and keep track of invoices before they become overdue.  Set yourself reminders to follow up with customers. Cloud accounting systems are helpful in automating this process, allowing you to streamline the payment process and make your life easier, leaving you with more time to sweat the important stuff. There are a number of low-cost options available that can help you easily send invoices, track payments, automatically remind customers of outstanding bills and run reports on your financial health.

5. Replace stone age software 

Any opportunity to streamline your business should be grasped with both hands.  This means, taking a look at your admin processes and giving them a technology facelift. There is a huge range of simple technology tools available for small businesses now that can assist with every facet of your operations, from communication and marketing to payments.  Look at what it is that you need help with most, and source the tech tool that best suits your needs. It may cost a little to run, but these small expenses will be worth it in the time it saves you (just don’t forget to track it in your budget!).

You should also consider your front end offering. What options for payment do you provide? Are you still stuck counting notes and coins at the end of the day? Mobile payment apps enable small businesses to get paid wherever they are, immediately. And every small business owner knows cash flow is the holy grail. By giving your customers the opportunity to do business in the way that suits them, they’re more likely to come back next time.

Using tech to simplify your processes doesn’t just make your life easier, it also means you can devote your precious time to other things that will help maintain a steady cash flow, such as new business acquisition, customer service and managing your team.


Maintaining a healthy cash flow and bottom line is as much about managing the money once you have it, as it is about securing the cash in the first place. Having complete visibility of your business and sufficient cash in the till will help take care of your business during difficult times, so you can rest easy at night.

More articles like this: When Good Credit Becomes Bad Credit 

About the author

Anna Fitzgerald is the Group Head of Corporate Relations at Prospa. She focuses on media relations and driving our government, public policy and regulatory agenda. Prospa is Australia’s #1 online lender to small businesses. Prospa understands small business owners need faster finance solutions so that they can make timely decisions quickly and seize opportunities with confidence.

Australian small business automation cash flow credit management due diligence NewsHub payment terms payments small business
Executive Director, Communications & Strategy
Anna is the Executive Director of Communications & Strategy at the Australian Finance Industry Association (AFIA). She was the Group Head of Corporate Relations at Prospa from 2017 to 2021. Anna is an experienced executive leader with a demonstrated history in technology start-ups, scale-ups and corporates. In her current role, she enables financial services to thrive by encouraging innovation, enhancing competitiveness, supporting customers and Australia’s economic recovery.
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