To paraphrase Warren Buffett: “Cash is to a business what oxygen is to an individual – rarely noticed when it’s there, but is the only thing you can think about when it’s gone.”
Watching your cash reserves dry up – or not having enough in the first place – is one of the most stressful experiences a business owner can face.
Unfortunately, it’s a reality for many right now.
So, what could be quietly killing your cashflow?
Excess born out of success
When things are going well, it’s easy to upgrade your lifestyle – nicer car, bigger house, lavish holidays.
But unchecked personal spending can quietly become the biggest drain on your business’ cash. Worse still, it usually comes with a tax bill.
Success is great. Just don’t let it become a liability and don’t tie your identity to things that drain you of your cash.
Compounding costs
Costs grow – quietly and quickly.
Just like how a good investment compounds, so do your expenses. Failing to review your supplier arrangements, subscriptions, or vendor contracts regularly can cause your margins to slowly erode.
Start strong, negotiate hard, and review often. Cost control is a cashflow essential.
Debtors
Not getting paid on time? That’s a red flag.
It might signal poor-quality clients – or poor internal processes. Common issues include:
- Invoicing delays
- Billing the wrong person
- No direct debit setups
- Weak follow-up
- Vague payment terms
- Gaps in your finance team
Cashflow isn’t just about making money. It’s about collecting it – on time, every time.
Unfunded capital expenditure
Just because you can afford that new piece of equipment doesn’t mean you should pay for it from your operating cash.
Too often, businesses drain their working capital for big purchases, then scramble to meet wages, supplier bills, or tax obligations.
Avoid this trap. Forecast your needs and secure financing ahead of time – before you’re left short.
Change in business conditions
The world moves fast. If you’re not watching, you’ll miss it – and your cashflow will feel it first.
Staying across shifts in your market, economy, or industry is not optional. It’s survival.
Lack of visibility
If you can’t see what’s coming, you can’t prepare for it.
Many business owners fly blind without accurate financials or clear forecasting. This creates anxiety, poor decision-making, and – ultimately – cash crises.
Invest in real-time reporting, trusted advisors, and financial systems that give you clarity, not just numbers.
Undisciplined pursuit of more
Growth isn’t always good.
Scaling too quickly, without a clear strategy or solid foundation, often leads to cashflow problems.
More staff. More space. More overheads. And suddenly – less cash.
Grow, yes. But do it deliberately, with planning and control. Discipline keeps you solvent.
Poor tax strategy
Paying more tax than necessary? That’s cash you’ll never get back.
Businesses that scale well are structured well. They seek tax advice, plan early, and use every available tool to reduce tax liability while staying compliant. The right advice pays for itself.
Final thoughts
The businesses that survive long-term understand a simple truth – cashflow is everything.
It’s easy to ignore when it’s there. It’s all you think about when it’s not.
Therefore, pause and ask yourself – not just what’s next, but: What could quietly kill my business if I’m not paying attention?
As American businessman Charlie Munger wisely said: “All I want to know is where I’m going to die, so I’ll never go there.”
Identify the risks. Avoid them. Then build the systems, habits, and support to make sure you never end up there.
Andrew Ash is a business advisor, fractional CFO, and tax agent. He can be contacted at aash@belefonte.com.au or 0412 055 814.
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