Do You Really Understand Your Cash Flow?
Many shopfitters carefully track sales and profit — and that matters, because you have to generate a profit to generate cash. But if you want to be sure your bank balance is healthy, you need to be a bit cuter than that.
Managing cash flow is not about how much money you have in the bank (although that’s the result you want). It’s about understanding how it gets there.
Without a plan to generate, allocate and invest cash, you risk:
- Chasing sales instead of high margin work
- Finding yourself financing low margin jobs
- Carrying debt (like a big overdraft) that weakens financial flexibility
- Not funding your business properly, or at the right time, so you pay too much interest
- Missing opportunities to scale sustainably
1. Operating Activities = The Business’s Engine
This is the heartbeat of your business — where cash is created or destroyed in daily operations.
Where cash comes from
- Sales — getting paid for the work you do
- Payments received from debtors
- Interest and dividends received
Where cash goes
- Cost of sales — things to get the work done: wages, materials, subbies or plant hire
- Overheads — facilities you need: staff salaries, insurances, equipment maintenance
- Premises costs
- Interest on debt
- Taxes
How to master it
- Optimise your cash conversion cycle — put simply, make sure money flows in faster than it flows out.
- Use sensitivity analysis to stress-test your plans.
2. Investing Activities = The Car’s Body
This is where strategy meets execution — how you use cash to drive your business’s value, getting the assets (kit or machinery) that create your sales and take you on your journey.
Where cash comes from
- Selling equipment
- Investments — cashing in or selling
- Loan repayments from others
Where cash goes
- Buying equipment
- Buying property or investments
- Lending cash to others
How to master it
- Prioritise investments using NPV and IRR.
- Align investments with sustainable operating cash flow growth.
3. Financing Activities = The Capital Structure
This determines how you fund your expansion — through debt or equity, getting the money to buy the kit that will take you on your business’s journey.
Where cash comes from
- Using or selling shares
- Taking on new debt
- Generating cash from profits
Where cash goes
- Paying interest or dividends
- Buying back shares
- Paying off debt
How to master it
- Optimise your capital structure — don’t try to finance kit that you will keep for years out of cash flow from operations.
- Align financing (loans or investment) to how long you intend to keep what you buy.
- Make sure you get the right type of loan — asset finance is much cheaper than other loans.
- Align dividend and share repurchase policies.
The Takeaway
Don’t just focus on profit. Real financial intelligence includes a strong funding and daily operational cash flow strategy.
Make sure your business is getting paid as quickly as possible by customers, and is financed properly. Keep your eye on debtor, creditor and stock days.
Regularly check your debt to equity ratio, which is the loan to value in your business.
The businesses that win aren’t just profitable — they use their cash to maximise their income and business value. They know how to fund the journey. If cash is the fuel your car needs, funding is the money to buy the car and pay for the petrol.
If this resonates with you, or you find it interesting, why not book a meeting to see what else we can do to help you?
