The answer: Sometimes nothing, sometimes everything! Many a company has been tripped up by doing calculations based on profit, rather than actual cash flow.

Let’s start with a simple demonstration of the difference between the two.

Here’s how we calculate profit

Invoices ISSUEDPayments MadeProfit

Looks good right? We’re in business baby. Or are we?

How we calculate actual CASH FLOW

Invoices PAIDPayments MadeActual Cash flow

Not so pretty. Don’t calculate cash flow based on forecast income, you’ll set yourself up for failure.


The crudest explanation for cash flow management is the practice of delaying your outgoings whilst speeding up income. Here’s how to strike a better balance.

Keep on top of your accounts

To boost cash flow, you need to know where your cash flow is at right now. If you’re not comfortable with numbers, hiring an accountant is an extremely good investment. As well as keeping your books up to date and in order, a good accountant will challenge your spending and keep you in check.

You should also always make sure you keep your personal finances separate from your business ones.

Claim what you’re owed as quickly as you can

Don’t wait until the end of the month to send out invoices, bill your customer as soon as the product or service is delivered and, if it’s a long-term project, don’t be afraid to request progress payments, or a deposit to get the job started.

You can also consider shortening your payment terms. Some businesses offer early payment discounts as an incentive for customers to pay up quickly. In short, do what it takes to get your money into your bank fast.

Watch your spending

Keep a close eye on your outgoings and don’t allow expenses to get ahead of sales. If you notice this happening, stop and check in with yourself.

For those expenses you can’t avoid, consider pushing out payment dates. You can do this in a number of ways:

  • Take advantage of supplier payment terms. If an invoice is due in 30 days, don’t rush to pay it in 15.
  • Schedule payments to be made on the day they are due. That way you won’t forget and the money stays in your account as long as possible.
  • Consider whether cashing in on a prompt payment discount is worth it for your business. If you’re paying with a loan, the interest on an earlier drawdown may offset the upfront discount. And remember the ROI calculation with Marketing investment, is it better to save 5 % in interest or via a discount, or to invest that hard-earned cash into marketing, it all depends on the ROI!!
  • Look at the whole picture when choosing suppliers, a slightly more expensive supplier with longer payment terms may suit you better than a cheaper one with short payment terms. Take the time to weigh up what’s best for you.
  • Always, always ask the question- does this expense contribute to profit? If it does, great, that is a good expense, if it doesn’t, cut it out and remember, there is a difference between revenue and profit…….

Take advantage of tax pooling

There are many reasons to love this country and tax pooling is one of them. Tax pooling allows New Zealand businesses to pool their provisional tax payments together in an account held by a registered intermediary (like an accountant or finance broker) at Inland Revenue. The underpayments of some are offset by overpayments of others. And it can help you avoid BIG lump sum drains on your cash flow plus IRD penalties or overdraft costs. If you would like to know more about tax pooling, click here.

Consider fee-funding

Fee-funding is like LayBuy for your professional fees. A number of organisations will offer to pay your professional fees upfront on your behalf, allowing you to pay them back over a longer-term, so you hold on to your cash for longer. While this means you pay interest on your fees for the service, it could be worth it for the sake of healthier cash flow in the long run. Many accountants and lawyers offer fee funding to spread out those big annual bills as do many insurance companies.

Find cheaper alternatives for those essential services

Did you know you can lease a lot more than just cars and office space? Office furniture, technology and even talent (contractors!) can all be leased to save yourself huge outlays of cash and risk. Early in 2020, it appears Microsoft will stop supporting Windows 7, if you are still running your business on Windows 7, you may need to also upgrade your computer equipment, leasing may just be a much better solution here for your cashflow.

Another example is a service provided by one of our partners, MyHR. MyHR offers a subscription-based service for essential HR tools, making day-to-day business much cheaper and lower risk while avoiding the cost of an HR consultant or full time or contracting HR employee. Click here to find out more about MyHR.

Another example is your business power costs. If you are paying more than $ 1500 a month for your power, our partner SaveAwatt may be able to save you as much as 25 % on your bill. One Grow NZ Business has already banked savings of more than $ 7,000! Imagine the ROI from investing those savings into marketing!

SaveAwatt has a “No Savings/No Fee” policy so nothing to lose here. Click here to find out more.

Refinance Your Debt

With last week’s Reserve bank decision to decrease interest rates by a further 50 basis points, financing options have never been cheaper- refinancing for lower interest rates, extending loan terms and borrowing additional cash for investment purposes are all effective ways to boost your cash flow. Our partner, Finance New Zealand can help here with access to a wider variety of funding sources Click here.

Marketing Funding

That old catch 22, you need marketing to grow your revenue and you need more revenue/cash flow to pay for marketing. Revenue will normally lag investment in marketing so funding can be a challenge. We are extremely pleased to announce we have access to 6-month funding solutions for marketing campaigns of up to 3 months, a terrific way to fund that growth while managing the “oxygen” of your business. Click here to find out more.

Let someone else do your dirty work

There is nothing worse than a late-paying customer. Not only does your cash flow suffer, but you also spend time and energy recovering money owed to you and, let’s be honest, it can feel a bit awkward too. Credit Management and Debt recovery are one of the things Grow NZ partner, CESL, does very well. Check them out next time you need help recovering the cash – and it’s all on a “No Collect, No Fee” basis. Click here.