Let’s Talk About Cashflow

Cashflow is extremely important for businesses of all sizes. It is basically the net change in your company’s cash position from one time period to the next. If your incoming cash is more than your out going, this is seen as positive cashflow. While if your incoming cash is less than your outgoing, it is seen as negative cashflow. The success of a business is often measured using cashflow, as it is a key indicator of financial health and of a business is viable and successful.

Why cashflow is so important:

The phrase ‘cash is king’ doesn’t exist for no reason. Having positive and strong cash flow is so important within businesses to ensure success. No only because it means a business is more positive, but cashflow puts you in a more stable position to move forward with your business. You are more likely to get the loans you wants, while also protecting you from issues like loan defaults and foreclosures. In general, having cash on hand is great but cashflow is better as it demonstrates that you business is doing well and constantly has money coming in.

Don’t forget about debt

When you need to borrow money to buy things to help your business grow and get better, you are essentially using your future cashflow to make this happen. Therefore, to make this possible, you need to ensure your business has positive cashflow to ensure that you will not only be eligible for the loan in the fist place, but also so that you know that you will be able to continuously pay off your debt commitments. Between long term and short term loans that generally require monthly payments, the obligation to continuously make these payments restricts your cashflow. So it it always extremely important to keep these in and before you continue to invest in your business and pump out more cash.

Growth

Debt management isn’t the only reason to aim for a positive cashflow position within your business. Having positive cashflow also means you can feel confident and comfortable spending on things that will help your business grow. Upgrading technologies, building better work spaces, getting better equipment are all examples of things that will be beneficial to your business but require often are sums of money to make happen. In the long run, these upgrade may also work in your favour to help generate more positive cashflow. However, to get there, having an excess of cashflow is the goal so that not only can you comfortably afford to make these business changes, but also puts you in a position where you can operate strategically and proactively, rather than in reactive and defensive when things don’t go exactly as planned.

Flexibility

Having positive cashflow is the main aim within businesses for so many reasons, and yet another reason if because of flexibility. Any emerging dilemmas, or any critical decisions that arise can be far better tackled and dealt with should you have good cashflow. Rather than being backed into a corner, you will be able to make educated and informed decisions that will best benefit your business. This confidence in cashflow also makes it easier to make important purchases in both short and long term circumstances, while also allowing you to make immediate purchases if necessary. 

More Positive Perks

Some more perk of positive cashflow within your business is that it also allows you to disperse cash in the form of dividends to shareholders or owners.

Positive cashflow within your business also makes your business more appealing to a lender if you want to take on new debt and a new loan at some point. Along a similar vein to this is the fact that you will also have the ability to receive far more favourable credit terms.

In general, it is a good rule of thumb to be constantly striving for positive cashflow within your business. From debt control, to positive growth, to flexibility, you want to feel comfortable within your businesses financial positioning before you can confidently move forward.

For advice on how to better your businesses cashflow, please feel free to contact us. We’d love to help.

Need help with your accounting?

Find Out What We Do

June 30 Checklist for Business Owners

June 12, 2025
June is zooming by! Here’s another handy checklist for business owners—let’s get you sorted for EOFY and tick off those to-dos.

Our EOFY Guide for Taxpayers.

June 12, 2025
EOFY is almost here. Are you ready? Now’s the time to get your finances in order and maximise your tax return. Our latest guide covers top tax deductions, super contributions & co-contributions, SMSF must-dos, PAYG instalment tips and a 30 June checklist.

Maximise Your Rental Property Tax Deductions this EOFY

June 12, 2025
Whether you're a first-time landlord or managing multiple properties, understanding what you can claim at tax time can make a big difference to your bottom line. In our latest blog, we break down the most common (and often overlooked) deductions.

What is a Bridging Loan? And When Would You Need One?

May 12, 2025
Buying and selling property rarely lines up perfectly. The logistics of it all can be incredibly stressful. If you’ve found the perfect next home but haven’t sold your current one yet, a bridging loan can make your move easier, without having to wait on your current property sale.  What is a bridging loan? A bridging loan is a short-term loan that gives you the funds to buy a new property before your current property has sold. It’s designed to bridge the gap between buying and selling. These loans are generally interest-only and are typically offered for up to 12 months, giving you time to sell and settle on your current home while already owning the next one. When would I need a bridging loan? You might consider bridging finance if: You’ve found your next home but haven’t yet sold your current one. You want to avoid renting or moving twice between sales. You want more time to prepare your home for market to get the best sale price. You're building a new home while still living in your existing one. How does it work? Peak Debt: The lender combines your current mortgage, the cost of the new property (including stamp duty and legal fees), and any interest (if it’s being capitalised). This total is known as your Peak Debt. Interest Only: During the bridging period, you’ll typically pay interest only — or the interest may be capitalised (meaning it’s added to your loan rather than paid upfront). Sell Your Property: Once you sell your existing home, the sale proceeds are used to reduce your Peak Debt. End Debt: The remaining balance becomes your End Debt, which then continues as a standard mortgage. An example of a bridging loan. Your current home loan = $200,000 New home = $800,000 Total bridging loan (Peak Debt) = $1,000,000 After selling your home for $600,000, that amount is used to pay down your loan Remaining loan (End Debt) = $400,000 Things to consider. Like any major financial decision, it’s important to understand all the moving parts before you commit. Time pressure: You typically have 6–12 months to sell. If you don’t sell in time, the lender may step in to sell the property and/or charge default interest. This is an extra interest rate that a lender charges when you fail to meet your loan obligations — in this case, not selling your property within the agreed timeframe. Interest costs: If interest is capitalised, it means you're not making repayments during the loan period, so the interest gets added to the loan balance instead of being paid separately. This means your loan grows each month. Making even small repayments can help keep this under control. Equity & serviceability: Lenders will assess how much equity you have and whether you can manage the loan during the bridging period. Loan-to-value ratio: If your End Debt ends up being more than 80% of the new property’s value, you may have to pay Lenders Mortgage Insurance (LMI). Existing loan setup: If your current lender doesn’t offer bridging loans, refinancing may be required — sometimes triggering break fees if your existing loan is fixed. This means you may have to pay a penalty if you end a fixed-rate home loan early (before the agreed term is up). Is a bridging loan right for you? That’s the big question. Bridging finance can offer flexibility and peace of mind, helping you move forward with confidence rather than being held back by uncertain sale timing. But it’s not without risk or cost — so it’s vital to understand the structure, timeframe, and repayment expectations. If you’re considering your next property move and want tailored advice on whether bridging finance suits your situation, talk to the team at Ascent Property Co. or Ascent Accountants. We can also put you in touch with finance brokers to discuss what is best for you.

The true cost of work perks.

May 12, 2025
That work perk might be costing you more than you think… Fringe Benefits Tax (FBT) is charged at a whopping 47% — the same as the top personal tax rate. That means lower salary or fewer benefits. So, while salary packaging can save tax, in many cases it ends up costing you more.

Act Fast to Reduce Your Tax Bill!

May 12, 2025
If you’re expecting a higher income this financial year, now is the time to act. We’ve put together 9 Smart Tax Planning Tips that could save you thousands — but they only work before 30 June.
More Posts