A Newcastle business can look healthy on paper and still be days away from a payroll problem. I have seen versions of that situation for years: invoices are outstanding, cash is tied up in stock, and money that should have been reserved for tax has been absorbed into operating expenses.
I’m Paul Siderovski, founder of SiDCOR Chartered Accountants in Newcastle. After more than two decades working with business owners, I have learned that cash flow problems rarely arrive without warning. The warning signs are usually there. Owners are often looking at the wrong numbers, or looking at the right numbers too late. (SiDCOR)
Why Profitable Businesses Still Run Out of Money
Profit tells you whether the business has earned more than it has spent over a period. Cash tells you what is actually available in the bank when wages, rent, suppliers, super and tax need to be paid.
Those figures can move in different directions.
Say you invoice $80,000 this month. On your profit and loss statement, that revenue may help produce a strong result. If $35,000 of those invoices are still unpaid when payroll falls due, the profit does not pay the wages. The bank balance does.
Debtor days are one part of the problem. Xero Small Business Insights reported that Australian small businesses were paid an average of 6.0 days late in the June 2026 quarter. Six days can be manageable in a well-capitalised business. In a business already operating close to the line, it can mean using an overdraft, delaying a supplier or putting in more money personally. (Xero)
Stock creates the same problem in a different form. Inventory is an asset, but it is not cash until it sells and the customer pays. A growing business can become cash-poor by buying faster than it sells.
Tax is another common trap. GST, PAYG withholding and income tax obligations can create a false sense of available cash if the money has not been separated. I have long believed in setting tax money aside rather than treating it as working capital. If the money belongs to the ATO, do not build operating decisions around spending it. The ATO itself recommends setting aside amounts for GST, PAYG withholding and super so funds are available when obligations fall due. (Lee Woodward)
How Far Ahead Should a Small Business Forecast Cash Flow?
For many small businesses, I like a rolling 13-week cash flow forecast.
Thirteen weeks is long enough to expose pressure points but short enough to forecast with discipline. You can see payroll cycles, rent, BAS payments, loan repayments, major supplier bills and expected customer receipts without pretending you know exactly what will happen a year from now.
Update the forecast every week. Replace estimates with actual figures, move customer receipts when payment timing changes, add new commitments and test what happens if one large invoice arrives late.
You are not trying to predict the future perfectly. You are trying to buy time.
If the forecast shows a shortage eight weeks away, you have options. If you discover the same shortage two days before payroll, most of those options disappear.
The Three Numbers Every Owner Should Check Weekly
A useful cash flow routine does not need to take half a day. Twenty minutes each week can be enough if your records are current.
I would start with three numbers.
First, cash available now. Look at the actual bank position after allowing for amounts already committed. A bank balance of $120,000 is not really $120,000 of usable cash if $70,000 is needed for GST, wages and supplier payments in the next few days.
Second, money due in. Review accounts receivable by due date, not just the total debtor balance. Know which invoices are due this week, which are overdue and which customers regularly pay late.
Third, money due out. Look at wages, tax, super, suppliers, rent, finance repayments and unusual purchases coming up. Compare those outflows with realistic receipts.
Owners stop doing this because the business gets busy, the bank balance looks comfortable, or cash management is handed over completely to software or bookkeeping staff. Systems help, but the owner still needs visibility.
That discipline has shaped my work with business owners at SiDCOR Chartered Accountants. The purpose is not to stare at numbers. It is to know early enough to act.
What to Do When Cash Gets Tight
When cash starts tightening, work through the problem in an order that protects the business rather than creating a second problem.
Start with collections. Invoice immediately, check overdue accounts and speak to customers before assuming payment will arrive. Do not let an ageing receivables report become a list you glance at once a month.
Then review stock and work in progress. Identify slow-moving inventory, unnecessary purchasing and jobs that have been completed but not yet invoiced. Cash can sit inside the business simply because operational processes are loose.
Next, review spending. Separate costs that keep the business operating from costs that can be delayed, reduced or removed. Cutting everything at once can damage service, sales or staff capacity, so rank expenses rather than reacting emotionally.
After that, look at payment timing. Speak with suppliers before a due date if you need revised terms. If tax obligations are becoming difficult to meet, deal with the issue early. The ATO advises businesses that cannot pay on time to engage early, and payment plans may be available depending on the circumstances. (Australian Taxation Office)
Only then should you consider new borrowing. Debt can solve a timing gap. It does not solve a business model that regularly spends more cash than it generates.
Frequently Asked Questions
How much cash should a small business keep in reserve?
There is no single amount that works for every business. A seasonal retailer, construction company and professional services firm have different payroll, stock and payment cycles. Build the reserve around fixed commitments, the reliability of customer payments and how quickly revenue could fall.
Is profit more important than cash flow?
You need both. Profitability matters because a business cannot survive indefinitely without earning an adequate return. Cash flow matters because obligations must be paid on time. A profitable business can still fail if cash is locked in receivables, stock or poorly timed spending.
How often should cash flow be reviewed?
Weekly is a practical rhythm for many small businesses. Businesses with very tight cash positions, rapid growth or large payment swings may need to review it more frequently.
Next week, block 20 minutes in your calendar and build a 13-week view of cash in and cash out. Start with what is in the bank, what is genuinely due to arrive and what must be paid. That habit gives you something more valuable than a tidy spreadsheet: time to make a better decision.
About the Author
Paul Siderovski is the founder of SiDCOR Chartered Accountants in Newcastle. He has more than 20 years of experience in accounting, tax and business advisory, working with small and medium business owners on cash flow, business strategy and financial decision-making. (SiDCOR)
