Understanding Your Business Cash Flow

We often come across circumstances where we see a business that is profitable but are having cashflow difficulties. Often the answer lies on the balance sheet.

Here is a quick example. Let’s say the company’s profit and loss looks like this:



Operating expenses


Profit before tax



This looks like a fairly good business, but consider the following:

Company Tax at 30%


Car loan repayments, say $1,250 per month


Business loan repayments (principal), say $3,000 per month


Old ATO debt, say $1,500 per month



The result? A negative cash balance of $1,000.

It is good business practice to prepare a cash-flow forecast each year and continually monitor and manage your cash flow throughout the year.


by Scott Sharp

Scott is a Senior Accountant at Insight Accounting advice. He has a Bachelor of Commerce and is a registered tax agent. Scott’s experience covers all facets of accounting but he specialises in small businesses and SMSFs.


The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.