Managing business cash flow

Good cash flow is essential for any business. Being able to meet overheads whatever the circumstances, and having a surplus, are signs of a healthy business.

We’ve put together some tips to help with managing business cash flow. It’s a general guide so please seek professional advice for your own business.


Advantages of good cash flow management

Does your business have good cash flow?

These questions may help you figure out your business cash flow position:

  • Do you ever go into overdraft unexpectedly?
  • Do you have seasonal cash flow shortages where you struggle to meet expenses?
  • Do unexpected bills send you off to the bank for an emergency (temporary) overdraft?
  • Are you waiting for customers to pay before you pay your suppliers?


Cash flow is about shortfalls and surpluses

Successful cash flow depends on the timing of money flowing in and out of a business. Income and expenditure rarely happen together so good cash flow can help you prepare for shortfalls.

Inflows may include:

Payment from customers for goods and services

Receipt of a bank loan

Interest or returns on deposits or investments

Shareholder investments

Rental income on investment properties

Outflows may include:

Payments for stock, raw materials or tools

Wages, rent and daily operating expenses

Purchase of fixed assets

Loan repayments

Dividend payments

Drawings from the business

Payments for income tax, GST and other taxes

Surpluses are good. Shortfalls are not.

A surplus is a good problem to have. Here are some options you might like to consider:

If you have a shortfall in funding, here are some options you might like to consider:


Two easy steps for managing cash flow

1. Prepare a budget

Budgeting for the business financial year will help you foresee any cash flow problems before they occur. We may also need to see your budget if you’re applying for an ASB business or rural loan to help with your cash flow. You may want to split your budget into monthly cycles for closer management.

2. Forecast cash flow

Think ahead to what the next 12 months may bring, and monitor your cash flow forecast with what is actually happening in the business. Generally your forecast should include:

  • Cash receipts.
  • Cash payments.
  • Surpluses and shortfalls in receipts over payments.
  • Opening bank balances.
  • Closing bank balances.

Top tip:

It’s a good idea to get your cash flow forecast prepared by an accountant as they know exactly what to do and can give you professional advice.


How to improve cash flow

Here are some simple ways you may be able to improve your cash flow. Remember this is a general guide so please seek professional advice for your own business.

Manage debtors

Chase debts

Have a credit policy

Manage stock levels


Next steps

We hope you found this guide useful for helping manage your business cash flow. For more information on our business accounts, credit cards or business and rural loans, please get in touch with us.

Other helpful guides

ASB’s lending criteria, terms and fees apply. ASB’s Credit Card Conditions of Use and True Rewards Conditions of Use apply.

The above information is a guide only and should not be relied on as it does not take into account the financial situation of your business. You should seek your own professional advice to suit the particular needs of your business.

Business banking Managing business cash flow