Masterclass #1 

Mastering Cash Flow

You’ve just taken the first step towards helping your small business thrive in a competitive environment. Managing your cash flow is essential to growing your business. Simon Chhoeu, Client Director of Bentleys NSW, lends his expertise and wisdom to help you succeed.

Mastering Cash Flow: Essential strategies for small business growth

In October 2024, Vodafone Business hosted a Small Business Growth Masterclass in Sydney, aimed at equipping business owners with financial strategies for sustainable growth. One highlight was Simon Chhoeu, Client Director at Bentleys, who shared practical strategies to help owners gain control over cash flow – a vital component for long-term success.

Why cash flow matters

Cash flow – the movement of money in and out of a business – is critical for survival and growth, and mastering this flow can make or break your company. As Simon puts it, “Cash flow is the lifeblood of small business.” 

There are three main types:  

1. Operating cash flow: Daily funds for business operations
2. Investing cash flow: Money from buying or selling assets
3. Financing cash flow: Cash from loans or equity 

Understanding these will help you manage cash inflows like sales or credit and outflows such as rent, salaries and asset purchases.

“Cash flow is the lifeblood of small business.”

Cash flow forecasting: Planning for the future

Cash flow forecasting allows you to plan for upcoming expenses and avoid unpleasant surprises. Effective forecasting, says Simon, "provides peace of mind and is key to sustainable growth." Tools like Xero’s dashboard can help track major expenses, but a professional consultation ensures realistic projections, accounting for the gap between invoiced revenue and actual cash on hand.

Building a cash reserve

As Simon notes, “Without solid cash flow, even the most profitable business can falter.” He recommends building a cash reserve as a financial cushion. Setting aside 5–10% of profits in a separate account, ideally enough to cover three to six months of operating costs, allows your business to weather downturns or seize opportunities.

“Without solid cash flow, even the most profitable business can falter.”

Practical cash flow management tips

Managing cash flow involves a proactive approach to both inflows and outflows. Here are some suggestions:

1. Accounts receivable: Invoice promptly to maintain regular cash inflow. In service industries especially, shorter payment terms or retainers can help. 
2. Accounts payable: Negotiate payment terms with suppliers and avoid overstocking to keep cash from getting tied up.
3. Accessing finance: Building a strong relationship with a bank can simplify access to credit when cash flow is tight. Options like short-term loans or credit lines add flexibility.
4. Diversifying revenue: Expanding your income sources through new products or markets can strengthen cash flow stability.

Regular reviews and the ‘Power of 1%’

Monthly or quarterly reviews can reveal financial trends and guide adjustments. Simon recommends applying the “Power of 1%” strategy by making small changes like raising prices by 1% or reducing costs by 1%. These incremental adjustments can improve cash flow and profitability, while boosting resilience and business value over time.

Scaling your business with cash flow in mind

For small businesses looking to expand, aligning cash flow planning with growth goals is essential. Simon encourages gradual scaling, reinvesting strategically and continually applying the 1% improvement method

Mastering cash flow through regular forecasting, maintaining reserves, managing inflows and outflows, and making incremental improvements can help your business thrive.

Embracing these principles and strategies will give you the confidence to tackle challenges and explore new opportunities, setting your business up for lasting success.