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Top pressures on business cash flow and how to get ahead of it Posted on September 19, 2022

cash flow

The top (although not only) pressures on cash flow for small businesses are overdue invoices, inventory bloating, professional development to address the skills shortage and business technology. Various institutions, including Xero, the Australian Tax Office and Treasury have made announcements that relate to these themes with the intention of relieving cash flow pressure. Read on for more information…

Overdue invoices

Xero announced the findings of their Crunch: Cash flow challenges facing small businesses Part II report at the recent Xerocon Sydney conference. We attended the conference and heard that overdue invoices are costing small business $1.1 billion a year and waiting times for payment have reached an average of 6.4 days.

As platinum members of Xero, we had the fortune of getting ahead on the latest Xero update and launch of the new cash flow forecasting tool Analytics Plus. Xero said the update helped manage expected payment dates for overdue invoices and bills to simplify cash flow forecasts and give businesses a window on their financial health.

Inventory

It’s not surprising that many businesses are experiencing a glut of stock at the moment. It is in response to the recent actual or feared supply shortages. For many, it is resulting in inventory bloating – an oversupply or lack of visibility of accurate stock levels at all points of inventory – and it is negatively impacting cash flow.

Real time tracking of every stock item in your holistic supply chain, and having a plan for the sale of every item is critical. Dropshipping is another option – it is an order fulfillment method that does not require a business to keep products in stock.

Tax

The ATO announced in August their key focus areas for 2022-23 to help businesses minimise the cash flow disruption often caused by tax. These include the building of a digital-first tax ecosystem that integrates tax and superannuation and supplies a prototype concept to streamline the tax experience. It also involves pre-pandemic levels of tax collection so that debt does not blow out,  expansion of STP data to simplify employer reporting obligations, amping up cybersecurity and increasing data analytics capabilities.

Professional development

On 29 August 2022, the Treasury released for comment exposure draft legislation setting out the proposed small business skills and training boost that will provide small businesses that have an aggregated annual turnover of less than $50 million with a bonus 20 per cent deduction for eligible expenditure on external training provided to their employees. The boost is proposed to apply to eligible expenditure incurred from the budget announcement until 30 June 2024.

Technology

The budget announcement for a boost to business technology has now been explained as expenditure on expenses and depreciating assets that support digital operations or digitising operations may include, but is not limited to, business expenditure on:

  • digital enabling items – computer and telecommunications hardware and equipment, software, systems and services that form and facilitate the use of computer networks
  • digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices
  • e-commerce – supporting digitally ordered or platform enabled online transactions.

The boost is proposed to apply to eligible expenditure incurred from the budget announcement until 30 June 2023. An annual cap will apply so that expenditure only up to $100,000 will be eligible for the boost, with the bonus deduction capped at $20,000 per year.

The skills and technology boost is set to cost the government $1.55 billion.

If you would like to discuss your business cash flow improvement options in a complementary Business Discovery session with our team of experts, join our business workshop on 18 October and register here.

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Get in touch with our team today and learn how you and your business can grow to the next level. From structuring to sustainability, we'll help you reach your financial goals and live the lifestyle you deserve.

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