The PCR Blog

Helpful news, tips and business advice for small to medium business owners about how to maximise profit, minimise waste and grow and protect your business.

Company Setup Obligations 101: #4 Ways to Improve Cash Flow

Managing cash flow effectively is key to keeping your new business afloat and thriving. It’s a common challenge for entrepreneurs, who must juggle incoming and outgoing funds meticulously to maintain stability and foster growth. By staying on top of your finances from the start, you can steer your new venture toward success more confidently.

In the first three parts of this series, we covered the obligations involved in starting your own business, tax deductions you can claim, and Business Activity Statements. In this final instalment, we’ll explore practical ways to improve new business cash flow.

Understanding Cash Flow Basics

Before diving into strategies, it’s essential to understand what cash flow really is. Simply put, cash flow represents the net amount of cash and cash equivalents moving in and out of your business. Positive cash flow means more money is coming into the business than going out, which is crucial for growth and stability.

3 Ways to Improve Cash Flow in a New Business

1. Set Up Effective Bank Account Structures

One of the first steps in managing cash flow effectively is to set up a dedicated bank account for your company. This helps in segregating business finances from personal ones, which is vital for accurate tracking and management.

Separate Accounts for GST and Employee Withholdings:

  • GST Collection: When collecting GST, immediately transfer it to a dedicated high-interest account. This segregation ensures that GST funds are readily available when needed and not mistakenly spent.
  • Tax Withholding from Wages: Similarly, set aside tax withholdings from employee wages into another account. This practice means you’re always prepared for tax obligations without last-minute scrambles.

2. Plan for Compulsory Superannuation

Superannuation contributions are a compulsory element that should be meticulously planned. Allocate funds for superannuation each time you process payroll. By consistently setting aside this money, you can prevent future financial strain.

3. Utilise Cost-effective Banking Solutions

Explore banking solutions that offer higher returns. Online-only bank accounts often provide better interest rates, which can add up to significant savings over time. Use these accounts to store GST and withhold taxes to maximise your returns.

Cash Flow Tips for Start-up Businesses

  • Monitor and Forecast: Regularly monitor your cash flow and forecast future scenarios. This will help you anticipate problems before they arise and adjust your strategies accordingly.
  • Reduce Overheads: Constantly look for ways to reduce unnecessary expenses. Every dollar saved is a dollar that can be reinvested into the business.
  • Invoice Promptly: Develop a system for issuing invoices immediately after goods or services are delivered. Faster invoicing leads to faster payments, improving your cash flow.

Ways to Manage Cash Flow Efficiently

Implementing robust financial controls and using modern accounting software can dramatically improve how you manage new business cash flow. Tools like automated invoicing, digital payment solutions, and cloud-based accounting can provide real-time insights into your financial status to keep you informed.

Build a Strong Financial Foundation for Your New Business with PCR

While these cash flow tips can significantly enhance your cash flow management, partnering with our experienced financial professionals at PCR Accounting & Advisory can bring additional expertise to your financial strategy. Our team specialises in helping new businesses establish strong financial foundations, ensuring your cash flow is managed efficiently from day one.

Ready to take control of your business’s financial health? Contact us today on 03 9847 7516 for expert cash flow advice and comprehensive business advisory services.

Disclaimer: This blog post is for informational purposes only and should not be considered as financial or legal advice. Consult with a qualified professional for personalised guidance based on your specific circumstances.

Owner of PCR Accounting & Advisory, Peter Marmara-Stewart is a top-tier accountant and financial advisor dedicated to helping clients reach their business goals and achieve financial freedom. Peter is highly regarded for his client-focused approach and entrepreneurial spirit, catering to a diverse range of professionals across a wide scope of industries all across the country. Peter’s expertise can help you plan effectively, set goals, maximise profits and protect your assets. Get in touch today on (03) 9847 7516.