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In life, there are some absolute truths that resonate no matter who or where you are—universal principles that we can all agree to be true: The sky is blue. One plus one equals two. Businesses need cashflow to survive.
Business vitality, and certainly business longevity, is impossible without healthy cashflow. The importance of good cashflow is not lost on Australian business owners—who cite cashflow as the biggest factor keeping them up at night.¹ And with new research showing that nearly 80% of small-medium businesses (those with under 199 employees) have experienced cashflow issues in the last 12 months,² it’s a wonder whether any SMB owner has got any more than a wink in the last year.
There are few people that understand the trials and tribulations of cashflow better than Ulton’s Business Advisory Partner, Jason Krenske. With more than 29 years of experience in the accounting and finance industry and 21 years behind the wheel of Ulton’s Business Insights division, Jason has been helping business leaders crack the cashflow Rubik’s Cube and grow their business through strategic financial support for more than half his life.
‘Cash is king’, ‘cash is the lifeblood’—there’s plenty of snappy catchphrases out there, and for good reason, Jason says.
“Cashflow really is the lifeblood of everything. If you find yourself in a place with no cashflow and can’t pay your employees or your suppliers, you’re not going to be in business for very long,” he says.
“You might make a whole heap of sales, but if you don't get paid for them, you're effectively extending credit to your customers. And if you can't pay the employees who worked hard to achieve those sales, then within a week or two, the business is going to fail,” says Jason.
So, what do sleepless business owners need to know about taking control of their cashflow? We sat down with Jason to talk through his top pointers for those who are wanting to get to the bottom of their cashflow situation and move their business forward.
Most business owners are comfortable building a profit and loss budget—they know how to estimate their sales and costs. But often, owners struggle to connect the dots between these numbers and their actual cashflow situation.
“A common misconception people have is that their cashflow comes solely from profit, when really, it’s a whole heap of other things,” says Jason.
“Sometimes, businesses will look at the profits recorded on their P&L and be confused because while their profits might be high, they certainly don’t feel or see this money in their business,” he says.
This is where the three-way forecast creates clarity from confusion. The three-way forecast links your P&L, your balance sheet, and your cashflow projections to give you a clear, holistic view of your financial situation.
Explaining the value three-way forecasting provides to his clients, Jason says: “Three-way forecasting allows us to sit down, build the budget and set the targets, but also get to the bottom of where the business’s money has gone.”
The three-way forecast allows Jason and his team to find answers to important, though often overlooked, questions such as:
Through pursuing the answers to questions like these, Jason and the team are able to give their clients the clarity that’s been missing from their finances. He explains: “We’re then able to sit down and provide that explanation they’ve been looking for. For example, ‘Yes, you’re making $2mil, but your debtors have blown out to $3mil, you’re spending $4mil more on inventory, and your debt levels are way too high’. That’s where all your cash is going.”
“By having those meaningful conversations, you’re then able to make good, informed decisions on how to unlock the problems that they’re experiencing,” says Jason.
When it comes to improving cashflow efficiency, Jason stresses the importance of clear goals. Once you’ve set measurable targets, the whole business has something to work towards.
Take this client Jason supports in an external CFO capacity. For the purposes of this illustration, let’s call them, The Company.
Jason and his team take care of The Company’s cashflow modelling and variance-to-budget reporting, but they have also built and equipped The Company with a Power BI dashboard that updates daily. The dashboard monitors key data, such as gross sales and profit margins, and allows the sales team to see how they are tracking towards their targets in real time.
Keeping the team informed creates a direct connection between performance and cashflow, allowing them to make better decisions and keep things on track.
“If you don’t share that information with the team driving the results, you’ll never improve,” Jason says.
Diving into cashflow often reveals other areas for improvement within a business, be it workforce productivity, operational processes, or even organisational culture.
Jason illustrates this with another client story.
“In the case of this business, the three-way forecast led us to looking at the productivity of their people,” Jason said.
He explains that once this was identified as an area for improvement, he and his team were able to implement a model to assess the business’s staff productivity against data from lookalike businesses.
“Through this model, we were able to provide the benchmark for productivity and profit generation of employees, and through this, establish that yes, this business was falling short in comparison to their peers,” he says.
With the productivity gap identified, the client could implement meaningful changes that directly boosted cashflow and overall business performance. In less than a year, they went from fighting to keep the doors open to having the business in a much stronger position.
“When we began working together, this business was on the edge of needing to close their doors. Less than a year later, they’ve really begun to turn it around,” says Jason.
However, this kind of transformation is only possible if you’re ready to embrace the insights brought to light through methodical cashflow analysis and make the necessary shifts in response.
The key to healthy cashflow is clarity. When you understand where your cash is flowing, you can make informed decisions and set the targets that will keep your business moving forward. To learn more about how Jason and his team at Ulton can help you get on top of your cashflow, read up about Business Insights.
Sources
¹ NAB. Backing our businesses: Unlocking growth for small and medium enterprises. November 2024.
² YouGov research commissioned by Commbank. January 2025.
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