^{Cash Flow}

The cash flow cycle

Every dollar you invest in your business goes through the cash flow cycle before it comes back to you, bringing some profit with it. So the faster you can make the cycle turn, the more successful your business will be.

The cash flow cycle in action

For example, imagine you buy $100,000 worth of stock, then sell it at a 40% profit. When the account is paid, you receive $140,000 in cash. Then you can either:

• Reinvest the full $140,000 in your business and make another 40% on that. The more often you can do that, the more profit you can make.
• Keep the same $100,000 investment cycling around your business and use the profit for other purposes. The faster the cycle turns, the less money you need to plough into your business.

The flip side is that a slowing cash flow cycle means you need to find extra cash to keep your business running. If sales falter, accounts receivable blow out or production slows, you may need to dip into your reserves or borrow. And that comes at a cost.

Again, consolidating your banking can help. Time wasted shuffling funds between banks can be a big brake on your business.

Read more about speeding up the cycle in The big picture on cash flow brochure [brochure download in separate window] or discover how our cash flow solutions can help you keep cash moving.

Cash flow warning signs

A business could be having serious cash flow problems if:

• Its suppliers regularly go unpaid for more than 60 days.
• It has frequent disputes with suppliers or changes suppliers regularly.
• It often lodges BASs late.
• Employee super payments are significantly in arrears.
• Suppliers insist on cash-on-delivery.