Even profitable businesses can run short of cash. The key is to understand what drives your cash position and adjust the way you sell, bill, collect, buy and pay. Small, consistent process changes usually make the most significant difference.
Below are seven common cash flow blockers we encounter, along with guidance on how to address them.
1) Cash locked up in WIP and receivables
Work you have done but not billed (WIP) and invoices waiting to be paid keep cash out of your bank. Tighten billing cycles, invoice promptly, and follow up on overdue amounts with a clear cadence.
2) Accounts payable practices
Without budgets and planned payment cycles, outgoing cash can spike. Negotiate supplier terms, batch payments, and align due dates with your inflows to smooth the curve.
3) Slow stock turn
Inventory that lingers ties up cash you have already spent. Review forecasts, reduce slow-moving lines, and set minimum/maximum levels so stock turns faster.
4) Debt or capital structure
Short loan terms or mismatched funding put pressure on cash. Match asset life to loan term, and consider whether part of the business needs longer-term capital rather than short-term debt.
5) Low gross margins
If the gap between sales and variable costs is too thin, it will struggle to cover overheads and owner drawings. Revisit pricing, discounting, supplier costs, product mix and waste.
6) Overheads creeping up
Do a yearly (or quarterly) overhead review. Trim unused subscriptions, renegotiate key contracts, and check that each cost has a clear owner and purpose.
7) Sales volume is too low
If sales can’t support the cash demands of the business, the model needs attention. Clarify your offer, tighten conversion, and focus on the most profitable channels.
What to do next
Treating cash issues without addressing root causes is frustrating and time-consuming. A practical plan across billing, collections, purchasing, inventory, funding and pricing will improve cash flow and build a stronger, more valuable business. If you would like help prioritising the biggest wins, we can map this with you in a Cash Flow & Profit Improvement session.
